Accounting questions send shares of commodity trader Olam lower
Olam International slumped the most in six months in Singapore trading after short-seller Carson Block questioned the agricultural commodity trader's accounting methods.
The share fell 7.5 per cent to S$1.61 at the close, the lowest since May 16, while its bonds also fell in Asian trade.
Block said he is betting against the stock because Olam, which had a record level of shorts as of November 15, is booking profits on transactions before it is clear how the deals will work out and is "aggressive" in reporting biological gains.
Singapore-based Olam, handles more than 90 per cent of the world trade in peanuts and is one of the top six cotton traders.
Olam "strongly rejects the assertions made by Carson Block and or Muddy Waters", it said in a statement. The company said earlier it was not contacted before by Block nor his Muddy Waters research firm, and may issue a further statement if Block publishes a report on Olam.
Block, a 36-year-old lawyer, has successfully bet against Chinese companies that trade in North America after questioning their accounting methods. One target, tree-plantation operator Sino-Forest, slumped 74 per cent before eventually filing for bankruptcy protection in March.
"Olam has to come out to prove their case and allay the fears raised by Muddy Waters," said Alan Richardson, a Singapore-based fund manager for Samsung Asset Management, which does not own Olam shares. "We will need to see how both sides are able to articulate their arguments."
The company, whose second-biggest shareholder is Singapore's state-investment company, Temasek Holdings, is down 24 per cent this year in Singapore, compared with a 12 per cent gain in the benchmark Straits Times Index.
The stock dropped 21 per cent in over-the-counter trading in New York on Monday.
Olam's dollar-denominated bonds due 2017 plunged to a record and were trading at 91.5 US cents on the dollar in Singapore. Its net debt was US$5.7 billion as of September 30.
It said its financial statements have been audited by Ernst & Young and complies with the Companies Act and Singapore Financial Reporting Standards.
It reserves the right to "take strong and appropriate action with regard to any unsubstantiated or baseless assertions".