Beleaguered private healthcare giant NMC Health is preparing to take legal action following a short-selling attack on the FTSE 100 firm wiping off its valuation of £ 2.6 billion, The Mail on Sunday may reveal.
NMC Health shares – a consortium of Middle Eastern hospitals listed in London – halved last month after American short-seller Muddy Waters released a damning report that raised red flags over the accounting practices of NMC Health, alleging its finances pointed to potential ‘ fraudulent asset values and theft of corporate assets. ‘
A source close to the organization disclosed that two major law firms have been engaged to advise on filing a possible lawsuit to restore its image.
The source said: ‘ NMC Health looks at all possible legal remedies, both civil and criminal. ‘
According to a statement to the stock exchange, the legal claim would concentrate on actions taken by third parties to “mislead the market and manipulate the share price.”
Muddy Waters, managed by the legendary Carson Block bear raider, and a consortium of hedge funds based in the U.S., Switzerland, and London, cashed in from the decline in share prices as the ‘ short’ the shares.
Funds that have built up short positions in NMC include AQR Capital, PSquared, and Portsea.
Short-selling is a strategy that allows hedge funds to borrow shares under contract, returning them to the original owner when the price falls and the profit is pocketed.
The NMC insider said the December 17 crash caused by Muddy Waters ‘ study produced a ‘ financial loss ‘ to NMC’s pension fund supporters and institutional investors, including BlackRock and Legal & General.
NMC Health works in 19 countries including UK private hospitals and fertility clinics. The co-chairman is Bavaguthu Raghuram Shetty, a 77-year-old Indian billionaire who created the Abu Dhabi-based group and is a major shareholder.
Two of NMC’s other major shareholders, Emirati billionaires Saeed and Khalifa Bin Butti, sold NMC shares last week worth $490million (£ 375million) at a discount to cover loans owed to Credit Suisse and Deutsche Bank, triggering a further decline in shareholdings.
It pointed out that other companies it has criticized through critical studies, such as commodity trader Noble Group and Chinese forestry group Sino-Forest, were both exonerated by their supposedly independent reviews, only to fail later.