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

NMC Health founder and co-chairman resigns as troubled UAE firms woes continue

NMC Health is the UAE’s largest private health care provider. (NMC Health)
Short Url
Updated 17 February 2020

NMC Health founder and co-chairman resigns as troubled UAE firms woes continue

  • NMC Health is the UAE’s largest private health care provider

DUBAI: NMC Health, the UAE’s largest private health care provider, said on Monday its founder B.R. Shetty has resigned as the group’s joint non-executive chairman.
The resignation took effect on February 16, the blue-chip FTSE 100 company said in a disclosure to the London Stock Exchange.

Opinion

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


H.J. Mark Tompkins will continue as the sole non-executive chairman of the company, NMC Health said.
Abdulrahman Basaddiq, who was appointed as director in February 2014, and Hani Buttikhi, who was appointed as an executive director and chief investment officer in June 2017, also resigned.
UK stock market regulators are looking into the company after news that B.R. Shetty had inaccurately disclosed the size of his stake in the business.
NMC subsequently said that there had been a series of complex shareholder dealings involving Shetty, Bin Yousef and another top investor, Saeed Butti Al-Qebaisi. Al-Qebaisi previously held 17.43 percent of NMC shares until he unloaded a huge block last month and reduced his holding to 4.7 percent.
The NMC Health diclosure said: “In his resignation letter to the board, Buttikhi confirmed that he first became aware of previously unreported share transactions between the principal Shareholders in recent days when they were notified to, and then announced by, the company.”
NMC Health also stated that former chief investment officer “Basaddiq confirmed that he had no knowledge of any possible transfer of ownership of shares between the Principal Shareholders in May 2017, nor in relation to some unreported pledges and/or other securitization of shares by the Principal Shareholders which have now been notified to the Company.”


Furniture giant IKEA making masks to help fight coronavirus

Updated 31 March 2020

Furniture giant IKEA making masks to help fight coronavirus

  • The first batches for European health care facilities are in transit
  • Several other companies are also working to help address an acute shortage of medical supplies

STOCKHOLM, March 31 : Furniture giant IKEA is producing face masks and other protective gear for hospitals, joining a growing list of companies branching out of their normal business areas to help meet equipment shortages in the fight against coronavirus.
Having started off with masks for staff in China in early stages of the pandemic, the Swedish group is working with several suppliers to ramp up output of masks for health workers, as well as hand sanitisers, visors and single-use aprons.
The first batches for European health care facilities are in transit, Henrik Elm, global supply manager at brand owner Inter IKEA Group, which is in charge of supply, told Reuters.
Several other companies are also working to help address an acute shortage of medical supplies, with vacuum cleaner company Dyson making ventilators, fashion group Armani producing medical overalls and spirits brand Ricard donating alcohol for sanitisers.
Working from home
IKEA has reopened all but one store in China, where the virus emerged, but across markets a majority of the 436 stores are temporarily closed.
Demand for office furniture is holding up as many people are working from home in the health crisis, Elm said.
“The sales pattern is changing. One area where we are selling pretty well compared to others is office furniture. People are working from home and they have identified needs in their homes for it,” he said in an interview.
“So, it (demand) is distributed differently — in some areas we keep it up well, in some we have a major impact.”
Well-prepared’
Elm said supply chain disruptions had increased with the spread of the virus to Europe and America, with closed borders or restricted movement a key bottleneck.
IKEA has managed to cope, however, partly by spreading inventories to warehouses in several locations, he said.
“So far, we have seen a limited effect on the availability of our offer,” he said.
Elm said he expected no shortages of wood or other materials, such as plastics and textiles, as global demand for such materials was in decline.
One area of concern, however, is finding room to store goods already in transit to markets where IKEA has temporarily closed many of its stores.
“There will be constraints in coming weeks in harboring these goods. Warehouses will be a bottleneck,” he said. “Things that were on their way we are either re-steering or storing.”
IKEA produces a tenth of products itself and sources the rest from suppliers, mostly in Asia and Europe.
As IKEA and other retailers adapt to slowing consumer demand, many suppliers and service partners are struggling.
Elm said IKEA was assisting them with loans, swift invoice payments and help accessing government support packages.