When at war with short-sellers, especially Carson Block’s feared US outfit Muddy Waters, a company’s best defence is credibility. Another chunk disappeared at NMC Health on Monday as the hospital operator and member (for now) of the FTSE 100 index said its shareholder register could be wrong.
NMC was merely relaying information from Bavaguthu Raghuram Shetty but, since he’s the founder, co-chairman and public face of the United Arab Emirates-based firm, all parties should be squirming. Some 20m of the shares held by Dr Shetty, equivalent to a holding of almost 10%, could in fact be beneficially owned by his two Emirati partners, Saeed Mohamed al-Qebaisi and Khalifa Butti al-Muhairi.
The 77-year-old Shetty is a “visionary leader who follows his heart and intuition”, according to his NMC biography, but sadly stock exchange rules don’t allow room for doing your own thing. Basic stuff like the division of ownership among controlling shareholders is meant to be reported correctly.
We’re not talking about a trifling sum. NMC’s shares have plunged 60% since Muddy Waters launched its blistering analysis of the company’s financial condition in December, but 20m shares are still worth £185m.
One should also note that, according to NMC’s statement, some of the shares in question have been transferred to banks and “may also be subject to security arrangements”, meaning pledged as collateral. That detail is important because the two Emirati partners last month sold a slug of NMC shares to repay loans.
The rump of NMC’s beleaguered board has done what it can. It is “urgently seeking clarity” from all three shareholders about how many of their shares have been pledged as security. In the meantime, Shetty and Muhairi, who both sit on the board, have been suspended from directors’ duties.
As an advert for the London’s supposed high standards of governance and transparency, the saga looks dreadful. NMC is a FTSE 100 company, so is stuffed into a lot of UK savers’ pension pots, and it boasts three blue-chip advisers in the form of Barclays, JP Morgan Cazenove and HSBC.
NMC has denied the Muddy Waters’ allegations from the outset, launched an internal investigation and now says it has received “highly preliminary” bid approaches from US buyout giant KKR and Swiss firm GK Investment. The latter element pushed the share price from 800p to 926p on Monday and a takeover, if it happens, would spare the London market from further embarrassment.
Come on, though, Monday’s tale of potentially misleading disclosures looks bad enough already. The Financial Conduct Authority says it is “making inquiries with the relevant parties”. One hopes it’s being less gentle: insist on answers, not least from the cast of high-profile advisers.
At last, some fireworks as Ofwat faces overdue scrutiny
Exciting times for water wonks: one of the large privatised firms is so enraged by regulator Ofwat’s proposed price controls for the next five years that it will challenge them formally. Yorkshire Water is within its rights to summon the Competition and Markets Authority (CMA) but the last time a similar-sized firm did so was the mid-1990s.
It is virtually impossible from outside to tell if Yorkshire has a decent technical case when it says Ofwat’s stance – a function of many detailed calculations – would discourage long-term capital investment. One can, though, say it’s excellent news that we’ll see some CMA action.
Public faith in the water industry and its regulator is low and Labour’s nationalisation plans were popular for a reason. Customers have seen too many instances of companies delivering sub-standard service while showering dividends on their owners.
Scrutiny by a specialist team at the CMA could be a useful clear-the-air moment. Remember, the CMA won’t just consider Yorkshire’s plea that the regulator has been too harsh; it is free to rule that Ofwat should have been tougher.
In fact, it would be helpful if Yorkshire is joined in the appeal lounge by others. Thames and Northumbrian are the likely candidates and have until the end of this week to decide. The more, the better: a showdown could be exactly what’s required to determine if a broader revamp of regulation is necessary.
Intu makes slow progress, but must aim higher for equity boost
Intu, the beleaguered owner of Manchester’s Trafford Centre and Lakeside in Essex, is making progress. It now has a name of a potential outside volunteer to chip in a few quid to support a mammoth fundraising – Hong Kong-based Link Real Estate Investment Trust.
The open question, though, is whether £1bn-£1.5bn, the rumoured target for the equity injection, will be enough to repair a horribly stretched balance sheet. The bears say twice as much is needed. Intu, if it can, needs to aim high.
