Muddy Waters says it's shorting NMC Health, shares sink
Shares of Abu Dhabi-based healthcare centre operator NMC Health tumbled on Tuesday after research firm Muddy Waters said it had "serious doubts" about the company’s financial statements, accusing it of manipulating its balance sheet to understate debt.
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Muddy Waters, which was founded by renowned short-seller Carson Block, noted concerns about NMC’s asset values, cash balance, reported profits, and reported debt levels.
The research firm said NMC’s $107.4m investment in redeveloping NMC Royal Women’s Hospital contains "numerous red flags", while its $36.4m acquisition of 70% of Premier Care Home Medical and Health Care appears to be "a significant overpayment".
"Many investors are under the impression that NMC does not use reverse factoring. In addition to a Credit Suisse supply chain finance fund (of which some investors are aware) that holds notes issued by NMC, we found a reverse factoring facility arranged by an outfit called Channel Finance that appears to convert NMC payables into debt.
"The Channel Finance notes have been de-listed as of November 2019, which we suspect could be an attempt to cover up NMC’s use of this facility. The amounts used in each are material in our view, and we believe that they are not included in NMC’s debt figures."
Muddy Waters, which is short NMC, also said the company deliberately understated its debt by about $320m as of FY 2018 by not reporting leases associated with its Aspen Healthcare acquisition as finance leases.
"We are unsure how deep the rot at NMC goes, but we do not believe that its insiders or financials can be trusted," it added.
At 1045 GMT, the shares were down 21% at 2,038p.