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Muddy Waters strikes again.
Shares in NMC Health sank 25% in London on Tuesday after Carson Block’s Muddy Waters said it is shorting the stock because it has “serious doubts” about the company’s financial statements and accused the company of manipulating its balance sheet to understate debt.
In a statement on its website, Muddy Waters said it was concerned about NMC’s NMC, -27.70% asset values, cash balance, reported profits and reported debt levels.
The U.S. short seller alleges that the company inflated asset purchase prices and capital expenditure, and deliberately understated its debt by about $320 million for the fiscal 2018 year 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,” Muddy Waters added.
Muddy Waters also posited that executive compensation at NMC has nearly tripled in two years to $18.7 million a year, and “insiders have monetized material amounts of stock.”
NMC did not have any immediate comment.
Headquartered in Abu Dhabi, NMC Health is the largest healthcare provider in the UAE. About 60% of the company is held by insiders, including Dr B R Shetty, who founded NMC, as well as investment vehicles of the Bin Butty family.
In November Moody’s cut NMC Health’s outlook to negative from stable reflecting higher than anticipated leverage. “Whilst operating cash flow generation has been strong, NMC carried out a number of acquisitions which have been partly debt-funded along with the ever growing capital needs to take advantage of attractive organic growth opportunities in Saudi Arabia and other markets,” the ratings agency said in a statement.
Muddy Waters in August targeted another London-listed company, Burford Capital BUR, -3.35% , which saw its shares drop sharply as a result. Burford Capital, a litigation finance company, in reply said Muddy Waters engaged in market manipulation.
