(Adds details)
Dec 17 (Reuters) - U.S. short-selling firm Muddy Waters said
on Tuesday it had acquired a short position in NMC Health Plc
, criticising 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 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 and Aster DM Healthcare Ltd.
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 destabilises
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.
(Reporting by Noor Zainab Hussain and additional reporting by
Pushkala Aripaka in Bengaluru and Kirstin Ridley in London;
Editing by Saumyadeb Chakrabarty and Edmund Blair)
Burford Capital (BUR)
