Opinion

NMC and Finablr up to their necks in muddy waters

NMC and Finablr up to their necks in muddy waters

Author
Short Url

The meltdown of NMC Health continues apace. Shares in the Abu Dhabi-based medical group, the leader in the regional health business, which is listed on the London Stock Exchange (LSE), have lost 70 percent of their value since the middle of December. That represents £4 billion ($5.19 billion) of value lost for shareholders in less than two months.

The significance goes far beyond the world of finance. Founded in the 1970s by Indian entrepreneur B. R. Shetty, NMC holds a hallowed place in the UAE corporate structure.

It was one of the first medical businesses to bring quality health care to citizens and residents in the UAE’s private sector. It is the closest the country has come to having a national health service along Western lines.

NMC also became a standard-bearer for UAE business on the global stage. In 2012 it listed its shares on the LSE and saw them soar by 20 times in value. In summer 2018, NMC shares were trading at more than £4,000 each; today they change hands at around £800.

But the seeds of NMC’s current crisis — not too strong a word — go back further than the London IPO (initial public offering). During the financial crisis, NMC found itself in urgent need of funds. Given its central role in UAE life, it quickly found backers, with good links to the Abu Dhabi establishment, who injected liquidity in exchange for equity.

Saeed Al-Qebaisi and Khaleefa Al-Muhairi, Emirati entrepreneurs par excellence, along with Shetty himself, were the main beneficiaries of the booming share price, but they now find themselves the victims of huge value destruction.

Last December, Muddy Waters, a San Francisco-based investment firm with a reputation for hard-hitting analysis and market intervention, struck with a vengeance. Led by the combative Carson Block, the firm makes money by identifying what it regards as over-valued companies and “shorting” their shares.

Short selling is stock market practice whereby an investor agrees to sell shares at a certain price in the expectation that it will be able to buy them back at a lower price in the future. Common in Western markets, it was only allowed in the UAE and Saudi Arabia relatively recently.

Muddy Waters announced it was placing NMC on its shortlist after it identified serious defects at the company that had gone unnoticed in the preparation for the London IPO and in the subsequent boom years. Asset valuations, levels of debt, executive remuneration and agreements with counterparts were all called into question.

NMC denied the allegations and appointed a former director of the FBI, Louis Freeh, to examine them, but the important point is that investors took them seriously and dumped the shares.

Now, as we await the verdict from Freeh, NMC is in a spiral of financial decline that threatens to undermine its very successful medical operations. London regulators are taking an increasing interest in the situation.

To add to the main NMC shareholders’ problems, another company in which they are invested, the financial services group Finablr, has also been savaged by the stock markets, despite the fact Muddy Waters has directly not targeted it at all.

Much like NMC, the core of the Finablr business is an important customer-interfacing operation, via the foreign exchange and remittance counters branded UAExchange. Similar to hospitals and clinics, such services are crucial in an economy like the UAE, dependent as it is on foreign labor.

The resonance of the NMC/Finablr debacles could be felt outside the UAE. NMC expanded aggressively in many global health markets in the good times, including the joint venture in Saudi Arabia with Hassana, part of the Kingdom’s General Organization for Social Insurance, announced last year.

There is no suggestion of any difficulties at that joint venture, nor has it attracted the public attention of Muddy Waters. But the Saudi partners in the deal have the right, even the duty, to question whether its UAE-based allies will remain as focused on the new venture in light of their problems at home.

What happens next at NMC and Finablr is crucial. There is talk of an intervention by the UAE authorities, which would not be unjustified given the central role both play in the country’s life. There is also speculation that Shetty and the other investors will sell the businesses to others with deeper pockets.

Much depends on the next move by Muddy Waters.

 

• Frank Kane is an award-winning business journalist based in Dubai.

Twitter: @frankkanedubai

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News' point-of-view

Vice chairman of UAE’s NMC Health quits as shareholder twists emerge

NMC is the largest health care provider in the UAE. (Supplied)
Short Url
Updated 16 February 2020

Vice chairman of UAE’s NMC Health quits as shareholder twists emerge

  • Resignation came after UK regulators announced that they were taking a closer look at the company

DUBAI: NMC Health is still trying to unravel details about the holdings of the company’s top investors, it said on Friday after announcing that one of its controlling shareholders had resigned from the board.

The largest private health care provider in the UAE is listed in London on the blue-chip FTSE 100 index but has come under increasing pressure after shareholder Muddy Waters raised questions over its finances, prompting major investors to sell out, sending its share price tumbling.

On Friday NMC said that vice chairman Khalifa Butti Omeir Bin Yousef is stepping down from the board. His resignation came after UK regulators this week said they were looking into the company after news that founder and chairman B.R. Shetty had inaccurately disclosed the size of his stake in the business.

NMC subsequently said on Friday that there had been a series of complex shareholder dealings involving Shetty, Bin Yousef and another top investor, Saeed Butti Al-Qebaisi.

Opinion

This section contains relevant reference points, placed in (Opinion field)

The company said Bin Yousef and Al-Qebaisi had notified them that some of their shares had been pledged as security for loans by Shetty in an arrangement they were not party to.

“The company continues urgently to seek clarity from Dr. B.R. Shetty, Khalifa Bin Butti and H.E. Saeed Bin Butti in relation to the above arrangements and their respective shareholdings,” NMC said.

The disclosure is likely to raise further questions about NMC’s governance and loans taken out by its top shareholders against their stock. Shetty on Monday said that he was stepping back from the board while a legal review of his shareholding disclosures continues.

Al-Qebaisi and Bin Yousef on Friday said that an estimated 26 million of the 58.5 million shares they hold have been pledged against loans.

Shares in NMC were down 3.8 percent in afternoon trade. The stock has slumped by 70 percent since Muddy Waters issued a report on Dec. 17 questioning the value of the company’s assets and reported cash balances.

NMC has denied Muddy Waters’ allegations and launched an independent review of its finances.

The company this week said it had received buyout interest from Italian-backed GKSD Investment Holding and United States-based KKR & Co. GKSD subsequently confirmed it could bid for the hospital operator but KKR has said it would not.


Saudi Arabia’s 6-point plan to jumpstart global economy

Updated 07 July 2020

Saudi Arabia’s 6-point plan to jumpstart global economy

  • Policy recommendations to G20 aim to counter effects of pandemic

DUBAI: Saudi Arabia, in its capacity as president of the G20 group of nations, has unveiled a six-point business plan to jump start the global economy out of the recession brought on by the COVID-19 pandemic.

Yousef Al-Benyan, the chairman of the B20 business group within the G20, told a webinar from Riyadh that the response to the pandemic -— including the injection of $5 trillion into the global economy — had been “reassuring.”

But he warned that the leading economies of the world had to continue to work together to mitigate the effects of global lockdowns and to address the possibility of a “second wave” of the disease.

“Cooperation and collaboration between governments, global governance institutions and businesses is vital for an effective and timely resolution of this multi-dimensional contagion transcending borders,” Al-Benyan said.

“The B20 is strongly of the view there is no alternative to global cooperation, collaboration and consensus to tide over a multi-dimensional and systemic crisis,” he added.

The six-point plan, contained in a special report to the G20 leadership with input from 750 global business leaders, sets out a series of policy recommendations to counter the effects of the disease which threaten to spark the deepest economic recession in nearly a century.

The document advocates policies to build health resilience, safeguard human capital, and prevent financial instability.

It also promotes measures to free up global supply chains, revive productive economic sectors, and digitize the world economy “responsibly and inclusively.”

In a media question-and-answer session to launch the report, Al-Benyan said that among the top priorities for business leaders were the search for a vaccine against the virus that has killed more than half-a-million people around the world, and the need to reopen global trade routes slammed shut by economic lockdowns.

He said that the G20 response had been speedy and proactive, especially in comparison with the global financial crisis of 2009, but he said that more needed to be done, especially to face the possibility that the disease might surge again. “Now is not the time to celebrate,” he warned.

“Multilateral institutions and mechanisms must be positively leveraged by governments to serve their societies and must be enhanced wherever necessary during and after the pandemic,” he said, highlighting the role of the World Health Organization, the UN and the International Monetary Fund, which have come under attack from some world leaders during the pandemic.

Al-Benyan said that policy responses to the pandemic had been “designed according to each country’s requirements.”

Separately, the governor of the Saudi Arabian Monetary Authority said that it was “too early” to say if the Kingdom’s economy would experience a sharp “V-shape” recovery from pandemic recession.