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BR Shetty responds to NMC share price drop

London-listed company to issue statement shortly after $2b lost in market value

Dubai: NMC Health, the largest healthcare provider in the UAE, lost over a third of its market value on London’s FTSE on Tuesday after it became the latest target of short-selling research firm Muddy Waters.

NMC Health dropped 32.4 per cent and wiping out over $2 billion in market value, after the short seller raised “serious doubts” about the company’s financial statements, questioning the group’s asset values, cash balance, reported profits and debt levels.

In a response, the NMC founder Dr. B.R. Shetty said in a statement reported by Reuters that “We hold ourselves to the highest standards across our entire portfolio,” while adding that the company is “committed to offering world-class facilities and vital services to all sections of the community”.

Margins in question

Muddy Waters, founded by American short-seller Carson Block, alleged NMC “materially” overstated its reported cash balances, while adding that the company’s margins were “too good to be true” relative to UAE-focused peers Mediclinic and Aster DM Healthcare.

Muddy Waters is widely known for declaring short equity positions in financial markets based on its own research. Short sellers borrow shares, quickly sell it, and then buy the stock back to return it to the lender, aiming to pocket a capital gain on the anticipated drop in prices. While some argues it depresses successful companies’ share prices, others say short sales improve market efficiency.

The US short seller accused the company of inflating asset purchase prices and capital expenditure, and “deliberately” understating its debt by about $320 million for the fiscal 2018 year by incorrectly reporting leases associated with its Aspen Healthcare acquisition. NMC reported net debt and payables of $1.89 billion at the end of 2018.

NMC Health will issue a detailed response at 11am UAE time, a company spokesman said.

Shetty owns about 15 per cent of the stock. Another firm majority-owned by Shetty is financial services company Finablr Plc, which dropped 11 per cent after the news. Finablr listed in London in May.

NMC’s shares fell in August after Muddy Waters tweeted that it was planning on going ‘short’ on a certain unnamed stock, which fueled speculation that it could be the Abu Dhabi-based firm. The target turned out to be London-listed litigation finance firm Burford Capital, whose shares tanked after the reveal. Burford later argued Muddy Waters engaged in “market manipulation”.