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China's TAL Education calls short seller report erroneous, 'unsupported'

Chinese tutoring services provider TAL Education Group on June 14 responded to a report by short seller Muddy Waters Capital that accused the company of inflating earnings, calling it erroneous and ungrounded.

"The allegations made by this short seller contain numerous errors, unsupported speculation and malicious interpretations of events," the Beijing-based company said in a statement.

It added that TAL's board and its audit committee intend to review the allegations by Muddy Waters, and "will consider appropriate actions to protect the interest of its shareholders."

In a June 13 report posted on its website, Muddy Waters claimed that TAL began "fraudulently creating profits" as early as fiscal 2016 by "penciling in more favorable numbers" and using more sophisticated asset parking transactions that were compared to the practices used by collapsed U.S. energy company Enron Corp.

Muddy Waters also alleged that TAL overstated its net income by at least 43.6% for the fiscal years 2016 to 2018.

TAL is listed in New York, where the share price on June 13 dropped about 13% to $40 from $46.07 following the report's release, before inching up to $41.11 per share at market close.