Final hours! Save up to 55% OFF InvestingProCLAIM SALE

UAE's NMC Health tanks as Muddy Waters takes short position

Published 12/17/2019, 07:32 AM
© Reuters.  UAE's NMC Health tanks as Muddy Waters takes short position
UK100
-
NMC
-
MDCM
-
ATRD
-

(Reuters) - U.S. short-selling firm Muddy Waters said on Tuesday it had acquired a short position in NMC Health Plc (L:NMC), criticizing the healthcare group's financial statements and wiping almost a third off the value of the company's share price.

The short seller questioned the value of the London-listed firm's assets and cash balance, as well as its reported profits and debts. Muddy Waters said in a research note that NMC's asset purchase prices and capital expenditures were inflated.

NMC, which is based in the United Arab Emirates, was not immediately available for comment. Britain's financial watchdog declined to comment.

Shares in the healthcare provider plunged more than 28%, sliding to the bottom of London's bluechip index (FTSE) and were on track for their worst day ever.

NMC, which has operations across 17 countries, reported net debt and payables of $1.89 billion at the end of 2018, according to its annual report. NMC said in October it expected double-digit revenue and core earnings growth in 2020.

Muddy Waters, known in financial markets for declaring short equity positions on the basis of its in-house research, said NMC's reported cash balances could be "materially overstated" and said its margins were "too good to be true" relative to UAE-focused publicly traded companies Mediclinic International Plc (L:MDCM) and Aster DM Healthcare Ltd (NS:ATRD).

About 10% of NMC's outstanding shares were in short position as of Dec. 13, according to FIS data. It was not immediately clear how much of that short position was accounted for by Muddy Waters, a company founded by American Carson Block.

Short sellers borrow shares and immediately sell them, betting the price will fall. They then buy the shares back and return them to the lender, aiming to pocket the capital gain.

Advocates say the practice puts a check on investor over-confidence and corporate spin. Critics say it destabilizes markets because shortsellers have an interest in driving a company's share price down.

Muddy Waters, which came to fame by betting against some Chinese companies, took its first short position in a London-listed company in August, when it bet against litigation funder Burford Capital (L:BURF).

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.