Olam International, a Singapore listed agriculture commodities trader, has become the latest company to be hit by research company Muddy Waters.
Muddy Waters had in recent times published research reports against Chinese companies that trade in North America and had profited from its short positions. One notable case, Sino-Forest Corp eventually filing for bankruptcy protection in March 2011.
Carson Block from Muddy Waters questioned Olam’s accounting methods and was due to publish a research report on Olam.
Olam immediately took steps to suspend its share from trading as it wanted time to respond to the report before letting its share trade again. As the report wasn’t published, Olam decided to lift trading suspension at 1530hrs on Tuesday.
The Company had requested for a trading halt pending the release of a purported and detailed report by Carson Block and/or Muddy Waters, which from media reports was to be released early today. This release has yet to take place. The Company is therefore requesting that the trading halt be lifted to allow investors to continue to trade in the Company’s securities.
The Company and its Board of Directors strongly rejects the assertions made by Carson Block and/or Muddy Waters. We will reserve the right to take strong and appropriate action with regard to any unsubstantiated or baseless assertions made in the media by parties whose motives might be in question.
I did a quick check of the share price of Olam. It was down almost $0.20 at one point but recovered to close at $1.605.
Of Olam’s listed derivatives, all were call warrants and there no put warrants.
The extended settlement (ES) contract, which is essentially a single stock futures, would have allowed one to take a short position on the stock. However, there were no bids! Looks like the designated market maker for Olam ES has chickened out.
So, you can’t short Olam using ES.
At least one CFD provider (I suspect all of them) has disabled shorting of Olam as well.
Anyway, Olam’s share price had already been a under-performer this year among Singapore listed stocks. It will be interesting to see how the drama unfolds.
Incidentally, Temasek Holdings is the second largest shareholder in Olam, with almost a 16% stake.
Muddy Water has since published their response to Olam’s reaction.