critical reports

DealBook: Singapore Company Sues a Vocal Critic

Peter DaSilva for The New York TimesMuddy Waters Research and its founder, Carson C. Block, are known for taking negative stances on Chinese companies. They are being sued by Olam International of Singapore over a recent report.

HONG KONG — Carson C. Block made a name for himself and his company, Muddy Waters Research, by betting big against the shares of Chinese companies that were listed in North America. Now he is setting his sights on Singapore.

On Wednesday, Muddy Waters published a scathing letter on its Web site saying that Olam International, an agricultural commodities company partly owned by the Singaporean sovereign wealth fund Temasek Holdings, was “at risk of collapsing” because of its debt load and other factors. The letter echoed similar comments Mr. Block made on Monday at a forum in London.

Olam responded on Wednesday, saying it had filed a lawsuit against Muddy Waters and Mr. Block in Singapore’s high court regarding the comments made in London. The suit involves charges of libel, slander or malicious falsehoods, a spokeswoman for Olam said. She added that the company was seeking damages but gave no details.

Olam’s chief executive, Sunny Verghese, hosted a conference call with investors and the news media, saying the company was one of the most-shorted stocks in Singapore and accusing Muddy Waters of “spreading these baseless assertions and trying to spook the market so that they can profit from their short position.”

Muddy Waters, based in Hong Kong and the United States, is best known for publishing highly critical reports on Chinese companies and profiting from its research by betting against their stocks.

Last year, Muddy Waters published a critical report on the Sino-Forest Corporation, a Chinese forestry company listed in Toronto. The stock dropped precipitously, creating huge losses for investors, including funds managed by the hedge fund billionaire John Paulson. Sino-Forest ultimately filed for bankruptcy.

After Mr. Block’s London comments, Olam’s shares fell 7.5 percent in Singapore on Tuesday once trading resumed after a temporary halt requested by the company. The stock recovered on Wednesday, rising 5.3 percent and closing at 1.695 Singapore dollars a share, or $1.38.

The rebound came despite the most recent Muddy Waters letter, which called Olam’s response to Mr. Block’s comments “extraordinary.”

“Companies that attack criticism the way Olam does fail to understand that raising money from the public is a privilege,” said the letter, addressed to Mr. Verghese and Olam’s directors. “Because Olam has received significant investment from the government of Singapore, Olam’s mismanagement of the public trust is that much less forgivable.”

Olam did not issue a direct response to the letter on Wednesday. In his comments on Tuesday, Mr. Verghese said Mr. Block had joined representatives of a hedge fund in a visit to Olam’s offices this month. He was dressed in a T-shirt, jeans and a baseball cap and gave a false name, according to Olam. It was only this week that Olam realized the visitor had been Mr. Block, Mr. Verghese said, after seeing photos of him on the Muddy Waters Web site.

In its letter, Muddy Waters called Olam’s trading halt and conference call a “frantic response,” saying the Singapore company also “evidenced a bizarre fixation on baseball caps.”

Before filing the legal action on Wednesday, Mr. Verghese said that Olam was trying to determine whether it had a case against Muddy Waters.

“The losses incurred by shareholders would more than justify the legal costs of pursuing this,” he said. “There are definitely disconcerting factors we have observed here in terms of some kind of manipulation.”

Short-selling is not as common in Singapore as it is in markets in the United States and in Europe, but Olam’s shares have experienced relatively heavy short-selling volumes recently. Since May, the percentage of the company’s shares on loan — an indication of short-selling activity — has more than doubled. According to data from the financial information services company Markit, 13.4 percent of Olam’s Singapore-traded shares are on loan, representing about four-fifths of all shares available to be borrowed.

Article source: http://dealbook.nytimes.com/2012/11/21/muddy-waters-turns-its-focus-on-singapore/?partner=rss&emc=rss

Critical Reports on Banks Prompt Fall in Financial Shares

A Senate report on Wednesday criticized ratings agencies and banks, like Goldman Sachs, for their practices during the mortgage crisis, while federal regulators also released a report saying that banks did a poor job of handling the flood of foreclosures. The regulators said they would impose penalties, without giving the timing or amount.

The banking sector was down almost 1 percent Thursday. Among the decliners were some of the 14 mortgage servicers that have signed consent agreements promising changes related to the regulators’ report.

“The uncertainty over this whole mortgage mess is contributing” to the decline in the financial sector, said Anthony G. Valeri, a senior vice president and market strategist for LPL Financial. “I think the market is waiting to see what the fines will be.”

“But it is a short-term concern for the market until we ultimately find out what the exact dollar amount is,” he said.

JPMorgan Chase, one of the servicers signing the agreement, said that it was adding as many as 3,000 employees to meet the new regulatory demands. Its shares were down 2.75 percent. Citigroup fell 1.3 percent; Bank of America was down 0.79 percent; Wells Fargo declined 1.7 percent, and Goldman Sachs lost 2.7 percent.

Indexes had been lower through most of the day but regrouped as the session neared a close. The Dow Jones industrial average closed 0.12 percent or 14.16 points higher, while the Standard Poor’s 500-stock index added less than a point and the Nasdaq lost slightly more than a point.

Alan B. Lancz, the president of Alan B. Lancz Associates, said the market might have gotten a late-day help from initial public offerings, like Zipcar, which was up 56 percent.

“As we headed into the last hour they were still showing significant gains,” he said. “That maybe gave a spark of catalyst to the buyers and that is why you see a fairly stronger day compared to what it looked like on the outset.”

Google also strengthened just ahead of its earnings, which supported the Nasdaq, he said.In addition, shares of consumer staples were up 0.56 percent as a sector, with Kraft Foods and Coca-Cola each gaining more than 1 percent.

While it was the banking sector that drew the most attention, analysts said other economic factors were at work.

Nomura analysts said in a research note that downward revisions to gross domestic product, negative revenue and loan growth, and an unpredictable regulatory backdrop have discouraged investors.

“We have spent the past few weeks on the road visiting investors,” the analysts said. “The overwhelming feedback on banks has been why bother.”

“It’s just hard to get people to care about bank stocks right now,” Nomura said.

An increase in unemployment filings last week also weighed on the markets as well as a monthly index on producer prices, which showed that energy costs were responsible for almost all of the increase in March.

Economists are concerned that increases in wholesales prices will be passed along and damp spending by consumers.

Recent downward revisions to economic growth, like that from the International Monetary Fund, may have damped sentiment, Mr. Valeri added.

But the bond market has benefited. The benchmark 10-year yields were little changed at 3.46 percent.

“We thought going into this week that it would be a tough week for Treasuries given the fresh supply,” Mr. Valeri said, referring to an auction of 10-year bonds. “A new theme emerging this week that seems to have trumped the data, and even the auctions, was the potential of a slowdown in the economy.”

Article source: http://www.nytimes.com/2011/04/15/business/15market.html?partner=rss&emc=rss

DealBook: Singapore Company Sues a Vocal Critic

Critical Reports on Banks Prompt Fall in Financial Shares

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