Focus Media Holding Ltd , a U.S.-listed Chinese company, said a short-seller's report accusing it of overstating its assets was completely untrue, and it would make a statement refuting the allegations before U.S. markets open on Tuesday.

Influential short-selling firm Muddy Waters accused Focus Media, a digital media and advertising company, of inflating the number of its LCD screens, among other charges, wiping out two-thirds of the company's market value on Monday.

The Muddy Waters report about Focus Media is completely untrue, Alan Ji, a spokesman for the company, told Reuters by telephone on Tuesday.

Short-sellers -- who borrow stocks and then sell them in the hope they will decline, so they can buy them back at a lower price -- have targeted Chinese companies listed in North America, bringing several to their knees with allegations of fraud and wiping out billions of dollars of shareholder value.

Focus Media's CEO Jason Jiang said in a posting on China's Twitter-like microblog service that short-sellers spreading rumors should be legally punished, and his firm will be vindicated by good fourth-quarter results.

Shares in the company closed at $15.43 on Nasdaq on Monday, losing $1.3 billion in market value. At one point, the stock slumped to $8.79, its lowest since September 2009. More than 77 million shares were traded, the most recorded in a single day.

Muddy Waters said Focus Media has been fraudulently overstating the number of screens in its LCD advertising display network -- in offices, stores and elevators -- by about 50 percent. It put a strong sell recommendation on the company's stock.

According to Thomson Reuters Starmine, 12 analysts covered Focus Media, of whom 8 had a buy rating, 3 a strong buy and 1 a hold. The company has beaten analysts' earnings estimates for at least 8 straight quarters.

The share decline is the latest in a string of bearish notes from Muddy Waters, and its director of research, Carson Block, one of the most prominent short-sellers of Chinese companies listed in North America. Block was unavailable for comment late on Monday.

Of the six companies Muddy Waters has written on before Focus Media, only two continue to trade: Oriental Paper Inc and Spreadtrum Communications .

DEALS QUESTIONED

Focus Media operates flat-panel display screens in commercial buildings in more than 100 cities and has screens in elevators in 35 cities as well as in supermarkets and stores, according to its most recent earnings report.

Muddy Waters said Focus Media reported in regulatory filings that it has 178,382 screens, while, according to its media kit, it has fewer than 120,000.

The company has also significantly and deliberately overpaid for deals and has written down $1.1 billion out of $1.6 billion in acquisitions since 2005, exceeding the company's enterprise value by a third, Muddy Waters wrote.

FMCN has written at least 21 acquisitions down to zero and then given them away for no consideration ... as a result FMCN has an accumulated deficit of $437.4 million, it noted.

However, Credit Agricole Securities analyst James Lee said the Muddy Waters note stated things that happened two years ago, and this had already been reflected in the stock price.

Two years ago, it was a hyper-competitive industry where people were making acquisitions at high prices. And they (Focus Media) wrote down financial investments in 2008-09, but we already lived through that cycle, Lee said.

In June, Muddy Waters accused Canada's Sino-Forest Corp of fraud. Investors lost billions of dollars and regulators and law enforcement officials in Canada are investigating the company.

The short-seller said Focus Media's overpayments include fraudulently booking at least six mobile handset advertising acquisitions it never made.

According to Nasdaq, a number of trades in the stock on Monday appeared to be erroneous, but all have been ruled legitimate.

(Reporting by Melanie Lee in Shanghai and Soham Chatterjee in Bangalore; additional reporting by Divya Sharma in Bangalore, Ryan Vlastelica in New York, and Nishant Kumar in Hong Kong; Editing by Ian Geoghegan)