Olam International OLAM
Olam's 45-page rebuttal ducks Muddy Waters' real points; we'll pay S&P to rate Olam's debt and prove the market underprices its accounting and acquisition risk.
Thesis
This follow-up note dismantles Olam's 45-page response to Muddy Waters' November 27 short report, arguing the rebuttal evades nearly every substantive point. Muddy Waters publicly offers to pay Standard & Poor's to rate one of Olam's debt issues, daring management to accept transparency by December 5. The note doubles down on three pillars: the Crown Flour Mill acquisition — touted by Olam as a 'best' deal — generated only a 0.9% PAT margin in FY2011, validating the value-destruction thesis; Olam's 45-page response addressed only one of 79 unexplained S$2.7 billion cash-flow revisions; and management hides behind Ernst & Young, the same firm that audited Sino-Forest. Muddy Waters also demands CEO Sunny Verghese retract defamatory 'manipulator' accusations and disclose whether management has pledged shares against margin loans.
SCQA
Olam International, a Singapore-listed agricultural commodity supply-chain operator, responded to Muddy Waters' initial short report with a defensive 45-page rebuttal, a defamation lawsuit, and accusations that Muddy Waters is manipulating the share price.
That response addresses only one of 79 unexplained S$2.7bn cash-flow revisions, lauds a 0.9%-margin acquisition as Olam's best, and hides behind Ernst & Young — the same auditor that signed off on Sino-Forest.
Muddy Waters publicly offers to pay S&P to rate one series of Olam's straight debt by December 5, demands substantive answers on the accounting revisions, and calls for retraction of the defamatory statements.
An S&P rating would expose mispriced credit risk; continued refusal would confirm the opacity thesis and reinforce conviction in the short, with potential value mortally wounded once true risk is recognized.
The three reasons
- 1
Olam answered only 1 of 79 unexplained S$2.7bn cash-flow revisions
- 2
Olam's 'best' acquisition (CFM) earned just a 0.9% PAT margin in FY2011
- 3
Management hides behind Ernst & Young — same auditor as Sino-Forest
Primary demands
- Accept Muddy Waters' offer to pay S&P to rate Olam's public debt
- Substantively address the 79 unexplained S$2.7bn cash-flow revisions
- Retract defamatory 'manipulator' accusations made by CEO Sunny Verghese
- Disclose whether senior management has pledged shares as collateral
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- Sino-Forest collapse (also audited by E&Y)
- Enron / Arthur Andersen unqualified audit opinions
- Autonomy / Hewlett-Packard (KPMG and Deloitte negligence suits)
Notable slides (5)
Notes
Follow-up note rebutting Olam's 45-page response to Muddy Waters' Nov 27, 2012 initial short report. Word-style memo (not slides), MW logo on cover; only visual artifacts are two cash-flow statement screenshots on p7 highlighting the negative-goodwill discrepancy. Strong rhetorical devices: 'Titanic heading toward iceberg', 'high water mark / man the lifeboats', 'E&Y Crutch' with Kenneth Lay/Enron epigraph, '1992 Mercedes vs 2012 Honda' analogy. Headline gambit is the public bona fide offer to pay S&P to rate Olam's debt — an unusually theatrical short-seller move worth cataloguing. No specific price target or stake disclosed. Author is the firm; Carson Block runs MW but is not individually signed.