Infamous short seller Muddy Waters targets Asian based Olam with accounting issues

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Muddy Waters Carson Block

Muddy Waters, the infamous US short seller headed by Carson Block and which was instrumental in causing the bankruptcy of the $6 billion bogus Chinese forestry company Sinoforest, listed in Canada, in May this year, is at it again. Block alleged in June 2011 that Sinoforest was operating under a smoke screen of accounting irregularities with much of its forestry inventory fictional. An internal investigation by the company concluded that “because much of the information which it is seeking lies with non-compellable third parties, may not exist or is apparently not retrievable from the record of the company” – some response!

Hedge Fund manager John Paulson was one of the big investors who lost out when Sinoforest collapsed. After SINO, whenever Muddy Waters crops up with a new potential scalp on its list, investors take note.

Just over a week ago Muddy Water’s CEO Carson Block announced at a London investor conference that he was shorting a Singapore based energy conglomerate called Olam after comparing the company to bankrupt US energy giant, Enron.  The shares have dropped over 10% since Block’s presentation and Muddy Waters has subsequently published a 133 page report on the company listing the company’s potential accounting issues. Olam has been defending itself against the allegations made by Muddy Waters about the state of its accounting, capital expenditure, indebtedness and alleged under performance at some of its African businesses. Olam last week issued legal action against Muddy Waters in Singapore and accused it of acting in concert with a short selling hedge fund to profit from a decline in its share price.

In an initial response, Olam said there was “no substance” to the allegations made by Muddy Waters, adding that its “accounting practices are fully compliant with international accounting standards”.“We will clear our name and hold Muddy Waters accountable for their damaging actions.”

Still, when Muddy Waters starts prodding, there’s often no smoke without fire! Let’s hope for John Paulson’s sake he hasn’t got a stake in this business after the Sinoforest calamity!

Contrarian investor UK

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