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"We find MDCA's accounting highly disturbing," Yu said in a statement to CNBC. He confirmed a short position in the stock.
MDC is an advertising holding company. Its founder, Miles Nadal, stepped down as CEO last year shortly after the company disclosed an investigation by the Securities and Exchange Commission into his expenses and MDC's accounting practices.
The title of the Gotham report was "MDC Partners (ticker = MDCA): Like Valeant Pharmaceuticals, But with Understated Debts."
"MDCA shares are worth less than $1.00 per share, implying 96 percent plus downside," it said. "MDCA will restate several years' historical results as a result of the issues covered in this report and elsewhere. The on-going SEC investigation will lead to new revelations of wrong-doing."
The report also questions MDC Partners' organic growth, which Gotham City says is around "1.5 percent for 2015, not 7.2 percent as reported." Yu estimates 42 to 53 percent of reported profits "are suspect" and the company's "true debt is understated by $300 million."
The shares fell more than 23 percent immediately after the release of the report before they were halted for downside volatility. They traded down 12 percent at market close Friday.
Regarding his previous targets, Endurance International Group shares are down more than 40 percent since Yu's April 2015 report on the company. And Spanish technology company Gowex filed for bankruptcy just days after Gotham City's negative July 2014 report accusing it of booking nonexistent revenue.
Gotham City Research is currently ranked No. 1 with an average one-year return of negative 58 percent out of the more than 100 short sellers tracked by Activist Shorts Research, an independent database dedicated to tracking activist campaigns.
The firm is among the few, along with Citron Research and Muddy Waters, that consistently move markets on newly released reports. Muddy Waters reportedly is launching a hedge fund and will discontinue its previous research model.
MDC Partners issued a statement defending itself from the accusations:
"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."