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05 March 2020

NMC Health cut from FTSE 100 Index after Muddy Waters criticism

The UAE-based hospital operator shares slumped 64 per cent in a little more than two months after Muddy Waters’ report and then were suspended from trading last week

NMC Health asked its lenders not to call in their loans while the company seeks an injection of capital/Bloomberg

by Bloomberg

NMC Health is getting booted from the UK’s benchmark FTSE 100 Index in another setback for the troubled hospital operator, which has been in freefall since short-seller Muddy Waters Capital accused it of financial improprieties in December 2019.

London Stock Exchange Group stated that NMC Health will be relegated to the mid-cap FTSE 250 Index when trading resumes, which owns equity index provider FTSE Russell.

NMC Health had a market value of GBP 1.96 billion ($2.5 billion) based on its last closing price, down from a peak of GBP 8.58 billion in August 2018. Before the Muddy Waters report, NMC Health shares had jumped more than 1,000 per cent since its initial public offering in 2012 and the company joined the FTSE 100 in September 2017.

The stock was suspended before the markets opened on 27 February 2020 and the UK’s Financial Conduct Authority has started a formal enforcement investigation into the company. NMC Health’s share suspension poses a dilemma for funds whose holdings are tied to following the benchmark index.

NMC Health initially labelled the allegations by Muddy Waters as unfounded, baseless and misleading that the company had overpaid for assets, inflated cash balances, understated its debt and had corporate governance shortcomings.

The company subsequently said it was not sure how many shares its principal stockholders held because they had been used as collateral for loans. NMC Health later fired its Chief Executive Officer after finding financial discrepancies and said the top shareholders had borrowed money via the company’s supply-chain financing arrangements, loans that were guaranteed by the company.

Earlier this week, NMC Health asked its lenders not to call in their loans while the company seeks an injection of capital.

According to FTSE Russell’s guidelines, FTSE-eligible shares are ranked by market value. Any stock that falls to the 111th position or below is automatically deleted from the FTSE 100, while any that rises to the 90th position or above join the index.

RELATED STORIES: NMC Health Muddy Waters FTSE 100 Index London Stock Exchange





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