Muddy Waters has targeted Olam (listed in Singapore) for "short selling". Temasek is a 15% shareholder of Olam, which makes this case even more interesting. At the moment the share is suspended, pending clarifications.
Muddy Waters has had some succes in some cases (Sino Forest comes to mind), but other cases were not clear cut at all (to say the least).
"Buyer beware", but also "Seller beware".
By Jesse Westbrook and Shruti Date Singh
Nov. 20 (Bloomberg) -- Olam International Ltd., the
commodities trader part owned by Singapore’s state-owned
investment company, plunged the most in four years after short
seller Carson Block said he’s betting against the shares because
he questions the company’s accounting methods.
The supplier of 20 agricultural goods from cocoa to rubber
fell 21 percent in over-the-counter trading in New York
yesterday, according to data compiled by Bloomberg, after Block
said the company is booking profits on transactions before it’s
clear how the deals will work out over time. Singapore-based
Olam is “heavily” indebted and aggressive in how it reports
what the company calls biological gains on investments, he told
the Ira Sohn Investment Conference in London.
Olam is “dismayed at the nature and lack of substance” of
Block’s comments and wasn’t contacted before by him or his Muddy
Waters LLC research firm, Chief Executive Officer Sunny Verghese
said in an e-mailed statement. He’s waiting for a report from
Muddy Waters and “will strongly defend Olam’s excellent
reputation for transparency and good governance,” he said.
Block, 36, has successfully bet against Chinese companies
that trade in North America after questioning their accounting
methods. One target, tree-plantation operator Sino-Forest Corp.,
slumped 74 percent before eventually filing for bankruptcy
protection in March last year.
‘Leap of Faith’
Olam will fail and recoveries for investors will be
“negligible,” Block said. “It’s a leap of faith to think the
company is being honest with its valuation” gains, he said.
It fell 0.9 percent in Singapore yesterday to S$1.74 before
the 29 cent plunge to $1.10 in New York. It has fallen 18
percent in Singapore this year compared with a 12 percent gain
in the benchmark Straits Times Index.
Hong Kong- and Mississauga, Ontario-based Sino-Forest Corp.
plunged before being suspended in August last year after a June
2011 report from Muddy Waters accused it of fraud.
Block took a short position in Sino-Forest by borrowing and
selling the stock, aiming to profit by repaying the borrowed
shares at a lower price. Sino-Forest filed for bankruptcy
protection in March. The Ontario Securities Commission accused
several executives including the former CEO Allen Chan of
involvement in a “complex fraudulent scheme” to inflate assets
Other companies targeted by Muddy Waters include New
Oriental Education & Technology Group Inc. Block said last month
he’s “more convinced than ever” that the Beijing-based company
is misleading investors. In February, Muddy Waters issued its
fifth report on Focus Media Holding Ltd., claiming the Chinese
advertising company overstated its network.
“As it pertains to Sino-Forest, he was able to unearth
something others weren’t,” said John Goldsmith, deputy head of
equities at Montrusco Bolton Investments Inc. in Toronto, who
sold his Sino-Forest shares for a loss in June 2011, seven days
after Muddy Waters published its report on the company. “He,
ultimately, was proven correct. You have to at least listen.”
Olam was founded in 1989 in Nigeria by the Kewalram Chanrai
Group as an export company to secure foreign currency, according
to Olam’s website. Today, Olam is the fifth-largest publicly
traded global wholesaler of agricultural products ranked by
revenue, after Bunge Ltd., Archer-Daniels-Midland Co., Noble
Group Ltd. and Glencore International Plc., according to data
compiled by Bloomberg.
The company supplies food to 12,300 customers in 65
countries and employs more than 18,000 people, the website says.
Temasek Holdings Pte, Singapore’s state-owned investment
company, holds 16 percent of Olam, according to data compiled by
The company’s first-quarter net income of S$43.2 million
($35.3 million) included an operation gain of S$10.1 million on
account of “fair valuation of biological assets,” Olam said in
a Nov. 14 statement. It said then that it started making such
valuations in the third quarter of fiscal 2012 and “hence there
was no operational gain/loss booked in the corresponding
period” a year earlier.
Overall, Olam said its quarterly profit rose 26 percent
while sales gained 45 percent to S$4.69 billion. Net debt was
$5.7 billion as of Sept. 30, according to data compiled by