Short-sellers have had a rip-roaring time in taking down lightly-regulated China stocks.
But Singapore-listed Olam International, which trades cashews, coffee and cotton, may be a tougher nut to crack.
Its stock cratered this week after notorious short-seller Muddy Waters said that the firm was over-leveraged and had fudged its balance sheet.
Olam’s founder and CEO, Sunny Verghese, shot back Tuesday in conference calls and comments to news media, calling the attack unfair and unwarranted, and vowing to support the stock with buybacks, if necessary.
The company’s dollar bonds also took a tumble on the news. Verghese, who slipped off Forbes’ 2012 Singapore list, is fighting back, and the stock rose 5% Wednesday morning after an overnight rally in its ADRs.
Muddy Waters’ chief Carson Block has a reputation for sinking stocks on the back of his research, which usually involves picking apart a company’s financial records.
In the case of Olam, a key allegation by Block is that the company overstates the income from its plantations using an accounting method known as “biological gains”.
Olam is audited by Ernst & Young in Singapore. One of its largest shareholders is Temasek Holding, Singapore’s sovereign wealth fund.
That means Singapore Inc. has a strong interest in getting to the bottom of what Muddy Waters claims to have uncovered.
But so far there isn’t much to go on.Block made his comments at a conference in London on Monday, but no research document has appeared, only a letter posted Wednesday morning on Muddy Waters’ website.
In it, Block sneers at Olam’s “disproportionate reaction” to his allegations and said its actions amounted to an “abject failure of leadership”.
But nothing more substantial, and certainly not the detailed skewering that helped to drive Chinese stocks like Sino-Forest to the wall.
Olam reported net profit of S$371 million in the fiscal year ending Jun. 30. Its substantial revenues, and the search for yield among fixed-income investors, enabled it to issue $500 million in five-year bonds in September.
This added to a debt pile of S$8.4 billion in its most recent quarter, which includes short-term borrowings. For more on UK-born Verghese and how he built his business, read this 2009 profile.
forbes.com
But Singapore-listed Olam International, which trades cashews, coffee and cotton, may be a tougher nut to crack.
Its stock cratered this week after notorious short-seller Muddy Waters said that the firm was over-leveraged and had fudged its balance sheet.
Olam’s founder and CEO, Sunny Verghese, shot back Tuesday in conference calls and comments to news media, calling the attack unfair and unwarranted, and vowing to support the stock with buybacks, if necessary.
The company’s dollar bonds also took a tumble on the news. Verghese, who slipped off Forbes’ 2012 Singapore list, is fighting back, and the stock rose 5% Wednesday morning after an overnight rally in its ADRs.
Muddy Waters’ chief Carson Block has a reputation for sinking stocks on the back of his research, which usually involves picking apart a company’s financial records.
In the case of Olam, a key allegation by Block is that the company overstates the income from its plantations using an accounting method known as “biological gains”.
Olam is audited by Ernst & Young in Singapore. One of its largest shareholders is Temasek Holding, Singapore’s sovereign wealth fund.
That means Singapore Inc. has a strong interest in getting to the bottom of what Muddy Waters claims to have uncovered.
But so far there isn’t much to go on.Block made his comments at a conference in London on Monday, but no research document has appeared, only a letter posted Wednesday morning on Muddy Waters’ website.
In it, Block sneers at Olam’s “disproportionate reaction” to his allegations and said its actions amounted to an “abject failure of leadership”.
But nothing more substantial, and certainly not the detailed skewering that helped to drive Chinese stocks like Sino-Forest to the wall.
Olam reported net profit of S$371 million in the fiscal year ending Jun. 30. Its substantial revenues, and the search for yield among fixed-income investors, enabled it to issue $500 million in five-year bonds in September.
This added to a debt pile of S$8.4 billion in its most recent quarter, which includes short-term borrowings. For more on UK-born Verghese and how he built his business, read this 2009 profile.
forbes.com
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