Health giant gears up for legal battle over £2.6bn slide
BELEAGUERED private healthcare giant NMC Health is preparing to take legal action after a short-selling attack on the FTSE 100 firm wiped £2.6billion off its value, The Mail on Sunday can reveal.
Shares in NMC Health – a Middle Eastern hospitals group listed in London – halved last month after American short-seller Muddy Waters published a damning report that raised red flags over NMC Health’s accounting practices, claiming its finances pointed to possible ‘fraudulent asset values and the theft of company assets’.
A source close to the company revealed it has engaged two major law firms to advise on filing a possible lawsuit to repair its reputation. The source said: ‘NMC Health is considering all potential legal remedies, both civil and criminal.’
The legal claim will focus on actions taken by third parties to ‘mislead the market and manipulate the share price’, according to a statement to the stock exchange. Muddy Waters, run by the notorious bear raider Carson Block, and a group of hedge funds based in the US, Switzerland and London, cashed in from the share price fall because they were ‘shorting’ the shares. Funds that have built up short positions in NMC include AQR Capital, PSquared, Gladstone Capital Management and Portsea.
Short-selling is a tactic that allows hedge funds to borrow shares under contract, returning them to the original owner when the price falls and pocketing the difference.
The NMC insider said the crash triggered by Muddy Waters’ report on December 17 has created a ‘material loss’ for NMC’s pension fund backers and institutional investors, which include BlackRock and Legal & General.
NMC Health operates private hospitals and fertility clinics in 19 countries including the UK. Its cochairman is Indian billionaire Bavaguthu Raghuram Shetty, 77, who founded the Abu Dhabi-based group and is a major shareholder.
Two of NMC’s other major shareholders, Emirati billionaires Saeed and Khalifa Bin Butti, last week sold NMC shares worth $490million (£375million) at a discount to cover loans owed to Credit Suisse and Deutsche Bank, causing a further fall in the shares.
NMC has said it will confirm its cash balances as part of an independent review of its finances. But Muddy Waters said similar reviews are usually ‘exercises in whitewashing that provide little to no transparency or accountability’.
It pointed out that other firms it has attacked through critical reports, such as commodity trader Noble Group and Chinese forestry group Sino-Forest, were both exonerated by their purportedly independent reviews, only to collapse later.
Dr Shetty said in a statement that he ‘fully supports the independent investigation and process in order to clarify matters’. NMC declined to comment on the litigation.