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*DJ Olam: Initiated Legal Action in Singapore High Court Against Muddy Waters, Carson Block
Dow Jones Newswires | 21 Nov 2012 6:49pm
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November 21, 2012 05:49 ET (10:49 GMT)
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(21-11-2012, 03:34 PM)d.o.g. Wrote: [ -> ]dzwm87 Wrote:On ethics wise, I think Carson might have some issues of conflict in interest. He had spoken so much but we have yet to see the report.Don't forget, his biggest hit was only Sino Forest - a one-hit wonder?
Of course Carson Block has a conflict of interest - he's short! And Sunny Verghese has a conflict of interest too - he's long!
I have read all the reports put out by Muddy Waters on their website. My take is that you may not agree with their conclusions, but based on the data they reference, their reasoning is sound.
Sino-Forest was big enough that it would be the biggest hit for almost anyone. There were others too e.g. China Media Express which has been delisted. If you look at the share prices of those targeted by Muddy Waters, the effect is quite clear. Very few have recovered, which suggests that the targets have simply been unable to refute Muddy Waters' accusations.
If Muddy Waters' work was poor it would be trivial to let the facts speak for themselves, and the firms' share prices should recover promptly. This has not happened, except perhaps for New Oriental Education.
Olam is no stranger to controversy - this is not the first time Olam is throwing a fit over someone else's comments. Hardly becoming of a global company with $17b in annual revenues.
For those who are trying to understand the business, good luck. They actively trade financial derivatives, so keep in mind that even if the physical commodity trading is fine, one financial trader can blow up the firm all by himself (see: Nick Leeson, Jerome Kerviel, Kweku Aduboli, Yasuo Hamanaka etc). Trading limits can always be bypassed, and employers often bend the rules when a star employee is doing well. Then one day he doesn't do so well, he doubles down to earn back the money, and boom! Game over.
As usual, YMMV.
Not true for Focus Media Holdings
I think Olam has 3 Or 4 bonds due next year for refinancing. It's going to cost them a lot more after this saga.
Self fulfilling prophecy happening.
Muddy water is just 落井下石
Does the situation present any opportunity here or us ? Long or short :-)
Given its substantial amount of total long term interest bearing debt (S$4.3 bil), do we have any insight on who its lenders are?
In the worst hypothetical case, since its debt to equity is > 1, there could be banks who may have to take hair cuts? Would this present systemic risk? Old Value buddies like me will recall Pan El in 1985. Just wondering in a hypothetical scenario analysis. Not suggesting weakness or casting aspersions on Olam.
(21-11-2012, 09:47 PM)newyorkcityboy Wrote: [ -> ]Given its substantial amount of total long term interest bearing debt (S$4.3 bil), do we have any insight on who its lenders are?
In the worst hypothetical case, since its debt to equity is > 1, there could be banks who may have to take hair cuts? Would this present systemic risk? Old Value buddies like me will recall Pan El in 1985. Just wondering in a hypothetical scenario analysis. Not suggesting weakness or casting aspersions on Olam.
Our markets has involved since 1985. I doubt SGX will shut the market for 3 days over one company.
(21-11-2012, 09:47 PM)newyorkcityboy Wrote: [ -> ]Given its substantial amount of total long term interest bearing debt (S$4.3 bil), do we have any insight on who its lenders are?
In the worst hypothetical case, since its debt to equity is > 1, there could be banks who may have to take hair cuts? Would this present systemic risk? Old Value buddies like me will recall Pan El in 1985. Just wondering in a hypothetical scenario analysis. Not suggesting weakness or casting aspersions on Olam.
If i not wrong, quite a bit are bonds. For banks loans, they come from a variety of places (around 60) depending on the country the assets are. Though most of them are still raised in the head office Singapore. Suspect a significant of it could be from Standchart, which somewhat also involves dear Temasek. Currently they have about 8 billion of 1-year revolving facilities, only 2 billion is drawn down. According to management, they have already raised about 1billion+ worth of bonds recently, which will be able to cover the maturing 2013 bonds. Covenant head room is also high.
with temasick backing OLAM, credit no problem lah!
Unless temasek does not want to, look out for what temasick do or don't do for next 6 to 12 months... :O
(21-11-2012, 03:34 PM)d.o.g. Wrote: [ -> ]Of course Carson Block has a conflict of interest - he's short! And Sunny Verghese has a conflict of interest too - he's long!
That's indeed true but I suppose at the very least the research report should have been released before such claims be made.
(21-11-2012, 08:20 PM)propertyinvestor Wrote: [ -> ]Not true for Focus Media Holdings
Maybe for better transparency (and for my curiosity), below is the to-date performance of each "Carson-short" stock's returns. The base for price returns will be the share price prior the release of the research report:
Orient Paper: -76%
RINO Intl: -99%
China MediaExpress Hldgs: Delisted?
Duoyuan Global Water: -96%
Sino-Forest: Trading Halt
Spreadtrum Comms: +48%
Focus Media: -3%
Fushi Copperweld: +52%
New Oriental Edu: +34%
Olam Intl (ADR): -5%
-
Note the returns are back of envelope calculations, I won't say this "study" is perfect but seem like Carson was less "effective" post the Sino-Forest incident. Prior to Sino-Forest, he was indeed deadly!
Agree with dzwm87... Their "prowess" has declined I think partly because to date I have not seen any EVIDENCE of Sino Forest fraud except what is being accused by Muddy Water, but the accusations have extracted its pound of flesh. I don't think that Sino Forest is totally clean but in a civil society we assume innocent unless proven guilty, but not Mr Market. That in short summarises the case against short sellers: It is much easier to destroy credibility than to build it. The company is essentially destroyed when people lost faith in it, whether or not it is guilty becomes irrelevant.
Nonetheless my main gripe is that Olam raised loads of money in 2008 claiming raw materials jumped. Fair enough. But never deleverage after soft commodities plunged.