If Muddy Waters’ track record is anything to go by, FTSE 100 hospitals giant NMC Health won’t be in the Footsie for long.
While the short-seller’s assault on its other London target, Burford, has proved less damaging than previous victories, Muddy’s track record of spotting looming corporate calamities is unerringly accurate. That’s particularly true in countries not renowned for corporate cleanliness, such as those where Abu Dhabi-based NMC operates.
Today, NMC shares bounced back from yesterday’s 32% crash after it issued a statement on Muddy’s criticisms.
Optimists who bought the shares may rue their decision.
Why? Because NMC’s notice, while declaring Muddy’s accusations of multiple frauds outrageous, fails to address in any detail a single allegation.
Surely if the work was so riddled with errors, NMC could — some 20 hours after the Muddy note was published — have given at least one fact-filled rebuttal.
But no. Instead, it merely directs investors to its website and promises to “respond in detail in due course”.
NMC’s response is particularly unsatisfactory given that Muddy claims it made the company aware of its concerns weeks ago. Indeed, it says NMC was cooperative until the subject turned to questions over debt, when it quickly became “evasive”.
Alleged understatement of debt was only one of many red flags Muddy raised. That’s why I wouldn’t trust today’s shares rally. In cases like this, the old shareholders’ saw comes to mind: the first cut is the cheapest.
