Singapore firm sues Muddy Waters for libel

File photo of Sunny Verghese, chief executive of Olam International, in 2009.

Story highlights

  • Olam has launched a libel suit against Muddy Waters and its founder, Carson Block
  • Adds to war of words between Asia agribusinesses and U.S. short-seller

Olam has launched a libel suit against Muddy Waters and its founder, Carson Block, sharply escalating its dispute with the investment firm.

The suit, filed in Singapore on Wednesday, adds fuel to the increasingly acrimonious war of words between one of Asia's largest agribusinesses and the US firm, one of the best-known shortsellers.

Olam said it had initiated the action based on "libel, slander and malicious falsehood".

The dispute erupted on Monday when Mr Block gave a presentation to hedge funds in London accusing the Singapore-listed company of being a "black hole" of excessive debt and accounting "shenanigans".

"All of the assertions made [in London] have not been substantiated by any report or publication which gave us these grounds to pursue this course of action," Aditya Renjen, Olam's general manager of investor relations, told the Financial Times.

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Muddy Waters said: "We have not received a lawsuit and, should we have to defend ourselves, we will do so vigorously."

The firm had sold short securities in the company, a way to bet against a business that Mr Block believes is overvalued. Analysts had expected Muddy Waters to publish an 80-page report detailing his criticisms of Olam but this has not yet materialised.

Olam is at the centre of production of some of the world's most important commodities, including cocoa, rubber and coffee. Its shares went into a tailspin on Tuesday, prompting the company to suspend them and mount a vigorous defence of its business and accounting practices. The shares were reinstated to close down 7.5 per cent on the day.

Sunny Verghese, Olam chief executive, said the company had enough funding to last 18 months and accused Mr Block of appearing at Olam's offices disguised with a baseball cap as part of a concerted effort with unnamed hedge funds to influence Olam's share price.

"Manipulating a company's share price in collusion and in concert is clearly illegal and we will be very focused on how our shareholders can be compensated if anything illegal was done here," Mr Verghese said at the time.

Earlier on Wednesday Muddy Waters hit back at what it called Olam's "frantic response" to the firms's concerns. It posted a comment on its website accusing the company of a "disproportionate reaction".

"You and your investors should note that attempting to silence critics is not a plan of corrective action. In no way does it make Olam stronger," Muddy Waters said.

Muddy Waters has broken fresh ground by targeting Olam having built its reputation by going after smaller companies, notably last year Toronto-listed Chinese timber company Sino-Forest.

Olam's biggest shareholders include Temasek, the Singapore government investment agency, with 15 per cent. It has declined to comment.

"Companies that attack criticism the way Olam does fail to understand that raising money from the public is a privilege," Muddy Waters said. "Because Olam has received significant investment from the government of Singapore, Olam's mismanagement of the public trust is that much less forgivable."

Olam's shares recovered on Wednesday to close up about 5 per cent at S$1.69.

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