London-listed NMC Health PLC saw its shares plunge 28 percent on Tuesday after equity research firm Muddy Waters raised serious doubts about the Abu Dhabi-based company’s financial statements and practices.
The UAE-based healthcare firm wiped out more than 1 billion British pounds in value after Muddy Waters questioned its asset worth, reported profits, and cash balance.
Muddy Waters, which is due diligence-focused, also raised flags against the company’s behavior, which it says gives rise to concerns about “hallmarks of significant fraud – particularly in frontier in emerging markets.”
“This behavior gives rise to concerns about fraudulent asset values and theft of company assets,” the US-based firm said.
“At somewhat better times, the company seems to ‘only’ materially mislead, such as by trying to give investors the (false) impression it does not engage in reverse factoring, and by understating (we believe intentionally) lease debt.”
It also doubted the company’s relationship with its auditor and independent board members.
“We do not see the independent board members as being truly independent. The company’s relationship with its auditor, Ernst & Young raises flags. Executive compensation has nearly tripled in two years to $18.7 million a year, and insiders have monetized material amounts of stock,” Muddy Waters added.
NMC Healthcare is the largest private healthcare company in the United Arab Emirates and was the first company from Abu Dhabi to list on the London Stock Exchange. In August 2016, the company expanded its operations into Saudi Arabia, where it owns a 70 percent stake in As Salama Hospital in Al Khobar.
“We are unsure how deep the rot at NMC goes, but we do not believe that its insiders or financials can be trusted,” the firm added.
NMC Health did not immediately respond to Al Arabiya English for comment on the matter.