• by Steve McClellan  @mp_mcclellan, April 29, 2016

MDC Partners stock fell more than $4 in midday trading Friday to $18.87 after a scathing research report from short seller Gotham City Research asserted that the stock was overvalued by 96% and worth less than a dollar per share. By the closing bell at 4 p.m., the company’s stock had recovered a bit but was still down 12% to $20.24.

The Gotham City report opined that the ongoing SEC investigation of MDC would “lead to new revelations of wrong-doing,” and that the ad marketing holding company would also be restating “several years” worth of past financial results.

The report also claimed that MDC’s organic revenue growth last year was in the vicinity of 1.5%, not the 7% reported by the company.

Gotham City issued the report in advance of MDC’s release of its first quarter 2016 results, due out Tuesday May 3.

MDC issued a statement calling the report “false and misleading.”

The company’s full statement:  “MDC Partners is in a pre-earnings quiet period and will report its results and host a conference call with investors after the market close on Tuesday, May 3rd. MDC management is confident in its financial reporting and accounting practices, and intends to defend itself against the false and misleading accusations of this short seller report, which is solely focused on destroying the value we are creating for our shareholders for their own personal gain.”

The SEC investigation began in October of 2014 and MDC disclosed it a year ago when it reported first-quarter 2015 financial results. The company said the SEC was probing its accounting practices and trading activity and acknowledged that then CEO Miles Nadal would return more than $8 million in bogus expense claims.

By the time Nadal was forced out (technically he resigned) last July, he agreed to pay back around $20 million to the company comprised of inappropriate expense claims and incentive bonuses he received but didn’t earn. Scott Kauffman, a company board director at the time, was named CEO.