UAE hospital group NMC is in poor financial health

Already under fire from short-sellers, the group now admits it may have misled investors about its ownership structure. Matthew Partridge reports

The crisis engulfing NMC Health, whose shares have fallen by around 70% since August, has “deepened”, says Alex Ralph in The Times. NMC is the top private healthcare provider in the United Arab Emirates, and the first company from that country to list on the FTSE 100. It has now admitted that the interests of its founder and associates “may have been misreported to the stockmarket”. The company has launched a review to verify the holding of Bavaguthu Raghuram Shetty, its co-chairman, as well as Saeed Mohamed al-Qebaisi and Khalifa Butti al-Muhairi, two other controlling shareholders. What’s more, there are concerns that Shetty may have failed to disclose a “memorandum of understanding” with al-Qebaisi and al-Muhairi that effectively gives them control of at least some of his shares, as well as pledging others as collateral for a bank loan.

Adding insult to injury

The latest dispute over who actually controls which shares is particularly embarrassing for NMC Health, since it damages the company’s credibility at a time when it is being attacked by short-sellers, as Chris Bryant points out on Bloomberg. Last year, activist short-seller Muddy Waters Capital accused it of misleading investors by giving false profitability and debt figures. While NMC called Muddy Waters’ allegations “false and misleading”, it has now admitted that, when it came to its ownership structure, “its own disclosures to the market were false and misleading, albeit for reasons beyond its direct control”. Perhaps the best thing for “long-suffering” minority shareholders is that “someone comes along and makes an offer for the healthcare operator”.

Shareholders shouldn’t hold their breath, says Ben Marlow in The Daily Telegraph. Given the uncertainty about ownership, as well as the allegations from Muddy Waters, it would be “madness” for any acquirer to table a formal bid without a “forensic” examination of the books. After all, Muddy Waters wasn’t the first “to quiz the way NMC operated”. Indeed, concerns about NMC’s “acquisitive growth” had “dogged” the company for ages, as well as questions about “governance” and the use of “supply chain finance”.

Whatever happens to NMC, the latest revelations revive a dilemma that has “haunted the UK markets for nearly a decade”, says Brooke Masters in the Financial Times. On the one hand the London Stock Exchange wants to compete effectively for international companies, while on the other regulators are anxious to protect investors from companies that “fail to provide the disclosure that British shareholders expect”. Some politicians argue that a “big bonfire” of financial regulations will now help Britain remain an “attractive global centre” for finance. However, NMC Health’s problems are a “timely reminder” of “just how badly things can go wrong”.

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