Muddy Waters’ Short-Target NMC Health, a FTSE 100 Company, Admits Doctoring Accounts on Massive Scale. Shares Suspended

“Even more damning than our initial report”: Carson Block of Muddy Waters.

The shares of NMC Health, a component of the London Stock Exchange’s FTSE-100 Index, were suspended on Thursday after an internal review revealed a morass of fraudulent accounting and fiduciary shenanigans. The CEO of NMC Health — which has health-care operations in 19 countries and is based in the UAE — was fired and its CFO placed on extended sick leave. The UK’s Financial Conduct Authority is investigating.

At the heart of the scandal is an arrangement that apparently enabled other companies controlled by NMC’s founder, the Indian-born billionaire Bavaguthu Raghuram Shetty, and two Emirati shareholders, Khaleefa Al Muhairi and Saeed al-Qebaisi, to raise £260 million in secret off-balance sheet financing, without the knowledge of the company’s board. There are also indications that the company’s shareholder register was falsified, and that some 20 million of the shares supposedly held by Shetty, worth around £185 million, are actually beneficially owned by his two Emirati partners.

“These arrangements were not disclosed to, or approved by, the board and were not disclosed to as related-party transactions in accordance with the listing rules,” the company said in a statement, adding: “The arrangements were not reflected on the company’s balance sheet.”

The “temporary” suspension of NMC’s shares ahead of the publication of the internal review prevented the annihilation of NMC’s shares, which have already collapsed by 76% since August 2018.

On December 17, 2019, short-seller Muddy Waters had targeted the company: “We have serious doubts about the company’s financial statements, including its asset values, cash balance, reported profits, and reported debt levels,” it started out. NMC was engaging in a raft of accounting irregularities, including overpaying investments, materially overstating cash balances, and reporting profit margins that “seem too good to be true.” And it concluded, “We are unsure how deep the rot at NMC goes, but we do not believe that its insiders or financials can be trusted.”

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