Things looked so very different a little over six months ago for investors in NMC Health (LSE: NMC).
After being listed on the London Stock Exchange in 2012, NMC’s share price went sideways, then started to rise through 2013 and 2014. The price of NMC shares doubled in 2015, then again in 2016 and 2017, rising by 644% over that period in total. At the same time revenues had increased, as had profits and dividends.
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The gains continued into 2018, all the way into mid-August. A half-year report released on the 20th of that month showed revenue was still robust at 20% but had fallen from the 34% seen a year previously. The spouse of NMC’s company secretary also disposed of a chunk of shares in August 2018.
NMC management issued upward revisions to forward guidance in October 2018, but NMC’s share price ended 2018 below where it started it.
Muddying the waters
The NMC share price continued its slide in 2019. A full-year report showing that revenues and profits grew by 28.3% and 20.4% respectively did little to arrest the decline.
Things took a turn for the worse in December 2019, when Muddy Waters Capital announced it was shorting NMC shares, and told the world why. In short, Muddy Waters accused NMC of significant accounting fraud and corporate governance failings. The NMC share price has fallen by close to 70% from 2,585p before Muddy’s report to 790p today.
NMC responded by rubbishing the claims made by Muddy but also announced an independent review to address all the allegations. Non-executive directors of NMC are set to oversee the independent review. One of these was already noted by Muddy to be a former partner at NMC’s auditors. In January NMC announced that a former FBI director’s investigation firm would conduct the independent review.
Who guards the guards?
This week NMC announced that B.R. Shetty, the founder and chair of NMC, and his advisers were carrying out their own review. Shetty believes he may have incorrectly reported his shareholdings in NMC. His associated family members and their holdings companies’ interests in NMC’s shares are also under review, as are the interests of other directors of NMC.
Shetty’s name appeared numerous times in Muddy’s report and he also controls fintech firm Finablr, which owns Travelex. Finablr’s share price has also tanked since December, and the boards of NMC and Finablr share members. Shetty has been asked to absent himself from board meetings at NMC.
The fact that shareholdings could be stated incorrectly is evidence that fact-checking at the company is weak.
Two of NMC’s largest shareholders sold up large amounts of stock this week, and another one also reduced its stake. Also, this week potential takeover offers from Kravis Roberts & Co. L.P. and GK Investment Holding Group for NMC were disclosed. This latest event has brought some support for NMC’s beleaguered share price.
Getting taken over and going private may be for the best. NMC has lost credibility with public markets and investors. I do not believe announcing impressive full-year 2019 results or the independent review exonerating NMC of Muddy’s allegations will restore much faith.