Dubai: London-listed shares of NMC Health fell 15 per cent on Thursday, its third day of declines after a scathing Muddy Waters report earlier sent the UAE-focused hospital operator’s stock price spiralling.
NMC, the largest health care provider in the UAE, dropped 32 per cent on Tuesday, wiping over $2 billion in market value, after the short seller raised “serious doubts” about the company’s financial statements, questioning the group’s asset values, cash balance, reported profits and debt levels.
NMC Health stood its ground the following day, saying it has not withheld any pertinent information to the markets, while seeking to reassure investors by buying back $200 million in shares and reaffirming its fiscal guidance for this year and the next. NMC said it will review the “baseless” report and will respond in detail in due course.
American short-seller Carson Block’s Muddy Waters, which didn’t disclose the size of its short position in NMC in the report, isn’t the only financial institution to take a short position against the health care firm. AQR Capital Management has a 2.69 per cent position against the stock, alongside PSquared Asset Management (1.1 per cent) and Portsea Asset Management (0.7 per cent), according to data from the UK Financial Conduct Authority.
Muddy Waters is widely known for declaring short equity positions in financial markets based on its own research. Short sellers borrow shares, quickly sell it, and then buy the stock back to return it to the lender, aiming to pocket a capital gain on the anticipated drop in prices. While some argues it depresses successful companies’ share prices, others say short sales improve market efficiency.
The short-seller earlier this year went ‘short’ on London-listed litigation finance firm Burford Capital, whose shares tanked 60 per cent after the reveal and later argued Muddy Waters engaged in “market manipulation”. Last year, Muddy Waters shorted London-listed chip maker IQE, an Apple supplier.
Muddy Waters has taken high-profile bets on other companies in the past. These include Singapore-based agricultural commodities trader Olam, China’s most valuable sports company Anta and China Huishan Dairy, which was once China’s largest dairy farm operator before going bankrupt.