Thursday, 29 November 2012

And Olam responded .....

Olam defended itself with the following 44-page report. It looks pretty solid, at least they did a good job responding in detail and fast. I expect some follow-up from Muddy Waters, it is their move.

The jury is not yet out, but some investors sold their shares, just to be on the safe side, the share has fallen about 40 cent in November.

The Valuebuddies forum drew attention to the fact that Olam has been buying back its shares, for instance here. Companies that have large debts and constantly have to issue new notes should not embark on a share buyback program, in my opinion. They should first strengthen their balance sheet, and only then, if the share is indeed trading at a huge discount to its net asset value, it could consider buying back its shares. But even then, I prefer a simple, transparent dividend, the higher dividend yield will automatically attract attention, so the result will be the same.

The Wall Street Journal detailed Muddy Water's track record so far in this article.


  1. Less than the current price if substantially the allegations of MW are true, more than the current price if the allegations are not true. Not a very helpful answer, I know, but this is often the case with the companies that MW targets. Olam is a huge conglomarate with presence in many countries, it is actively trading in derivatives, it has definetely assets but also lots of debt. It did have issues in the past. Almost impossible to get an accurate picture off. That is why I normally invest in much more simple companies, one line of business, one country, not too leveraged, then the quarterly reports give a good picture of the health of the company.