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Old 29th November 2012, 01:04 PM   #1 (permalink)
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Olam hits back at Muddy Waters' claims

Olam shares fall 3.85 per cent despite the company's 44-page point-by-point defence

by Conrad Raj 04:45 AM Nov 29, 2012


SINGAPORE - Olam International came back yesterday to strongly defend its debt position, business strategies and accounting practices against allegations by US-based short seller Muddy Waters that they were dubious and that the Singapore-based commodities trader was at risk of collapse.

Its 44-page, almost point-by-point defence dismissed the Muddy Waters allegations as "false and misleading".

"Our rebuttal to the 133-page report demonstrates the lack of substance in the claims. Our message to Carson Block (Muddy Waters' founder and research head) and Muddy Waters is therefore clear - this time the mud won't stick," Olam said.

At a media briefing, Olam CEO Sunny Verghese said the company is preparing another report which will go into even more detail to rebut the allegations. He also said he is grateful that Temasek Holdings, which owns about 16 per cent of Olam, has stayed invested in the company.

"That is very important, because the key objective of Muddy Waters, Carson Block and their accomplices was to really create fear and panic amongst our key stakeholders," said Mr Verghese.

He said that Olam is now seeking to establish whether other parties, such as hedge funds, have been involved in recent events. "In my view, Muddy Waters and Carson Block are just small parts of this whole play … We will do our best with the resources that we have to establish the link."

In its report, Olam once again said it faced no risk of insolvency as it planned for an appropriate capital structure and raised the requisite equity and debt to meet its investment plans.

It also reiterated that its financial statements and accounting policies met the required Singapore accounting standards and that its "differentiated" business strategy was working and yielding its intended results, helping it to build leadership positions in many of its businesses.

It rebutted the assertion that Olam's spending was "dodgy" and a drain on its capital and resources, pointing out that both organic capital expenditure and its mergers and acquisitions plans were the outcome of a conscious and deliberate strategy.

"A number of irrelevant statements and photographs, isolated facts taken out of context, unjustified observations and other elements of spurious argument have been woven together to create a false fabric of a story which is neither substantiated by the real facts nor consistent with any credible interpretation with the true and full facts about our company," said Olam.

Olam stock ended 3.85 per cent lower at S$1.50 yesterday with more than 101 million shares changing hands at between S$1.465 and S$1.575.

Many analysts appear to be assuaged by the Olam counter-report, but they expect volatility in the stock to continue, at least for the short-term.

"We just don't know how much Olam scrip Muddy Waters has borrowed to short sell in the market neither do we know how much it has released," one analyst explained.

Source: http://www.todayonline.com/Business/...-Waters-claims

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