By Svea Herbst-Bayliss
BOSTON (Reuters) - Carson Block, founder of short-seller Muddy Waters LLC, said he is betting that the stock price of OSI Systems Inc will fall, sending the company's shares tumbling more than 30 percent on Wednesday.
Block, who rose to fame by betting against a Chinese forestry company after accusing it of exaggerating its assets, alleged in a video documentary that the maker of Rapiscan airport metal detectors is "rotten to the core" and criticized its business practices.
Hours after the Muddy Waters report made headlines and the stock price began tumbling, OSI Systems issued a public response, saying that its inspection programs in Mexico and Albania "were the result of public tenders," or open and competitive bidding processes.
"Both have resulted in enhanced security, increased seizures of contraband, and improved transparency in customs declarations, significantly benefiting both countries," OSI said.
Block's report alleges that OSI, which describes itself as the supplier of security inspection technologies and services, relied on bribes to win a major contract in Albania. Block's report cited former OSI employees as its sources for the claim of bribery. Reuters could not independently confirm the claim.
OSI did not specifically respond to Block's claims of bribery, which it called "misleading allegations from short sellers." The company said it issued its statement because the Muddy Waters report "had an undue impact in the public sphere."
OSI Systems stock closed at $59.52, having traded at $84.47 just before the Muddy Waters report was publicly released.
In 2011 Muddy Waters shorted Chinese forestry company Sino-Forest Corp which sent the stock price tumbling and hurt some prominent U.S. hedge fund investors who had bet on the company.
After publishing the research on the Chinese company, Block said he got at least five death threats or threats of bodily harm to either himself, his wife, or his father, making him cautious about revealing his home base.