Muddy Waters threatens to counter-sue Olam

PHOTO: Muddy Waters threatens to counter-sue Olam

SINGAPORE - US-based short-seller Muddy Waters on Friday threatened to counter-sue farm commodities trader Olam and its chief executive for defamation as a war of words between the companies escalated.

Muddy Waters said Olam chief executive Sunny Verghese crossed the line during a conference call this week when he accused the US firm of being a front for hedge funds to drive down the shares of the Singapore-listed company.

In a statement it asked Verghese to apologise, warning that Muddy Waters reserved the right to take legal action against Olam, which has already filed a lawsuit in Singapore seeking unspecified damages from the research firm.

Muddy Waters triggered panic selling of Olam shares after its influential founder Carson Block told an investment forum in London earlier this month he was betting against the company, citing flawed accounting standards that masked its debts.

It later released a scathing 133-page report supporting its allegations and warned that Olam had a "high risk" of collapsing like US energy trader Enron did in 2001.

Olam fired back with a 45-page rebuttal which stressed that the company is on a sound financial footing.

In a conference call with analysts and the media late Wednesday, Verghese said Muddy Waters was being used as a front for some hedge funds to drive down Olam shares in the hope of profiting from it later.

Short-sellers borrow shares and sell them in the hope their price will drop. They can then buy the shares back at a cheaper price and profit from the difference.

"Muddy Waters has always been transparent about our economic incentives," the US firm said Friday.

"We do, however, draw the line at being called 'manipulators' and being accused of acting in concert with a group of hedge funds to drive down the price of Olam shares".

Describing Verghese's remarks as defamatory, Muddy Waters said "we demand a full retraction and apology" and warned that "we reserve the right to pursue legal action against him and Olam for these baseless statements".

Muddy Waters also offered to pay for Olam to get its bonds rated by credit watchdog Standard and Poor's.

There was no immediate comment from Olam, which sources products including cocoa, coffee, cashew, sesame and rice from 65 countries and supplies them to more than 11,600 customers.

Muddy Waters' assessments of companies have been closely monitored, especially after a report in 2011 forced Chinese timber supplier Sino-Forest Corp to file for bankruptcy protection.

Olam shares were trading at Sg$1.55 in early afternoon trade, down slightly from Thursday's close and 11 percent lower since November 19 when Block first made his comments.

Singapore's state investment firm Temasek Holdings is Olam's second biggest shareholder, owning a 16 percent stake as of March 31.