India-born billionaire BR Shetty resigns from Abu Dhabi’s ailing NMC health
NMC lost almost half its value the first week of February on speculation the company’s main investors faced a margin call, in which banks seize shares pledged as collateral.
NMC Health Plc, a hospital operator targeted by short seller Muddy Waters, said founder Bavaguthu Raghuram Shetty resigned amid investor concern he faced a margin call and misrepresented his stake.
The board asked for Co-Chairman Shetty’s resignation, which takes effect immediately, according to a person with knowledge of the situation. NMC has lost four board members since Friday, including Vice Chairman Khaleefa Butti, whose holdings are also being probed. The stock, the worst performer in the FTSE 100 Index this year, fell Monday morning and then rebounded, gaining as much as 2.3%.
“The share ownership and pledge debacle is a symptom of systemic rot and corruption at NMC,” Carson Block, founder of Muddy Waters, said in a tweet.
NMC lost almost half its value the first week of February on speculation the company’s main investors faced a margin call, in which banks seize shares pledged as collateral. NMC said Friday that First Abu Dhabi Bank and Al Salam Bank Bahrain obtained 20 million shares in the company from BRS International Holding, an investment vehicle of NMC’s top shareholders. The banks sold more than 8 million of those shares as “enforcement of security,” NMC said.
NMC operates the largest medical network in the United Arab Emirates and in 2012 became the first Abu Dhabi company to list in London. The shares started teetering in mid-December when Muddy Waters alleged that NMC manipulated its balance sheet and inflated the prices of companies it acquired.
Shetty, 77, was born in India and founded NMC in the 1970s after moving to Abu Dhabi. His spokesman said a legal review of the situation is ongoing and declined further comment.
Chief Investment Officer Hani Buttikhi and board member Abdulrahman Basaddiq also stepped down because they were appointees of the principal shareholders, NMC said, adding that they had no knowledge of the share transfers.
Questions remain over the role of Shetty’s family at the company. His wife and son-in-law both hold roles in senior management.
Almost 10% of NMC’s freely traded shares are shorted, according to data from IHS Markit Ltd. In mid-December about a third of them were.
Last week Swiss-based GKSD Investment, an investment company backed by hospital investors, said it’s studying a possible offer for NMC. In the first announcement released to the market on Feb. 10, GK Investment, a company also based in Lugano, Switzerland and founded by Tunisian businessman Kamel Ghribi, was said to be the possible bidder. GKSD later clarified GK Investment had contacted NMC on its behalf and was acting as an adviser.
When Bloomberg News contacted GK Investment Monday, a woman who picked up the phone said she’d been told to make no comment. The websites of both GK Investment and Ghribi said they were under maintenance.
N.M. Rothschild & Sons Ltd. and Goldman Sachs are advising GKSD. Under U.K. takeover rules, it has until March 9 to make a bid. NMC also said it got an approach from Kohlberg Kravis Roberts & Co. last week, but the private equity firm said Tuesday it had no plans to make an offer.
NMC has said Muddy Waters’s claims are false and the company hired former FBI Director Louis Freeh to conduct an independent review. The review is due to be completed before the company issues its financial results in March, said the person familiar with the situation, who asked not to be identified because the investigation is ongoing.
NMC said Mark Tompkins will continue as the company’s sole chairman.