Singapore-listed Noble Group has come out strongly against an attack by US short seller Muddy Waters, rejecting its claims about the firm as "inaccurate, unreliable and misleading".
Muddy Waters' report on Thursday echoed criticism earlier levelled at the commodities trader by anonymous group Iceberg Research.
Iceberg accused Noble of accounting malpractice in three reports starting mid-February, causing its share price to plunge 26 per cent in the past two months.
After the Muddy Waters report, the stock closed at 86 cents, down 5.5 per cent on Thursday. But Noble's staunch rebuttal helped it claw back ground yesterday as it rose 3.5 per cent, or three cents, to close at 89 cents, with 96.2 million shares traded.
In its response to Muddy Waters' claim that its debt levels are higher than reported, Noble said its balance sheet has "never been stronger or more liquid".
It also said Muddy Waters had omitted the impact on its results of cash proceeds from the sale of its 51 per cent interest in Noble Agri to grain trader Cofco. It said its gross debt was less than US$4 billion (S$5.4 billion) as of Dec 31, and its debt to capitalisation ratio of 38 per cent was a record low.
Analysts noted that the short seller seemed to have rehashed most of Iceberg's allegations.
Muddy Waters has said it will be issuing a response to Noble's rebuttal of its allegations.
"Muddy Waters is a big-name short seller," OCBC investment analyst Carey Wong said. "But it has to say something new rather than repeat what Iceberg has said. They also need solid evidence to support their allegations."
Reports from both Muddy Waters and Iceberg questioned the accounting of some Noble deals.
One criticism was that Noble had misled investors on the purchase and eventual sale of Indonesian coal mining services firm PT Alhasanie in 2011. Muddy Waters claimed Noble paid US$300,000 and immediately booked a gain of more than US$46 million.
But the trader said that these "are fully explainable through arms-length commercial arrangements and third-party independent valuations".
Analysts will watch if Noble's auditors grow more cautious. "Noble may have to be more conservative in terms of recognising its revenues," Maybank Kim Eng investment analyst Wei Bin said.
The Monetary Authority of Singapore said yesterday that it was reviewing Muddy Waters' report.
This article was first published on April 11, 2015.
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