NMC Health sees three directors check out, including company founder B R Shetty

Home UK NMC Health sees three directors check out, including company founder B R Shetty
NMC Health sees three directors check out, including company founder B R Shetty

There has been a rash of resignations from the board of under-fire NMC Health PLC (LON:NMC), including the departure of its founder, B R Shetty.

Shetty has stepped down from the board of the hospitals operator with immediate effect, as have chief investment officer Hani Buttikhi and board member Abdulrahman Basaddiq.

The resignations follow Fridays resignation of the companys vice-chairman, Khalifa Butti Omeir Bin Yousef, and reports that emerged last week that Shetty had inaccurately recorded his shareholding in the company.

READ NMC Health executive vice-chairman resigns after shareholdings misreported

The latest problems started a week ago, as the Abu Dhabi-headquartered company revealed that it was not clear how many shares exactly were owned by Khalifa Butti, Saeed Mohamed al-Qebaisi (aka Saeed Bin Butti) and Bavaguthu Raghuram (B R) Shetty.

A legal review carried out by Shetty and his advisers to verify his and his familys interests had found that the exact size of the shareholdings of the trio had been “incorrectly reported historically to the company and the market”.

In his resignation letter to the board, non-executive director Basaddiq, who was not considered an independent director by virtue of being appointed by the companys principal shareholders (namely Shetty, Saeed Bin Butti and Khalifa Butti), maintained that he had no knowledge of any possible transfer of ownership of shares between the principal shareholders in May 2017.

“We appreciate the difficult situation that he feels that he has been placed in as a result of recent notifications from our principal shareholders, but the board accept the reasons why he felt he needed to step down from the board,” said Mark Tompkins, the chairman of NMC Health.

Tompkins, who had previously shared the chairman role with Shetty, said the board also understood why Buttikhi had stood down.

Buttikhi and Basaddiq were both thanked by Tompkins for their contributions to NMC; Shetty was not.

Shares in NMC Health were up 2.6% at 794.8p in late afternoon trading.

NMC Health crisis: What has happened so far

Shares in NMC have taken a pounding in recent months, adds Calum Muirhead, falling over 60% since mid-November and more or less guaranteeing that the firm will be booted from the FTSE 100.

The share price collapse seems to have been sparked by hedge fund and activist short-seller Muddy Waters, which on 17 December published a scathing report highlighting what it said were “serious doubts” about the companys financial statements which gave rise to concerns over “fraudulent asset values and theft of company assets”.

Muddy Waters continued its broadside by stating that it believed NMC had “manipulated its balance sheet to understate debt” to the tune of around US$320mln as of its 2018 financial year, while also raising doubts about the independence of several board members and the relationship between the company and its auditor, Ernst & Young.

The company quickly hit back the next day in a bid to stem the ensuing share price plunge, which had seen the stock lose 32% of its value in a single session.

NMC said Muddy Waters accusations were “principally unfounded, baseless and misleading, containing many errors of fact” as it launched a US$200mln (£153mln) share buyback, seemingly to shore up the value of the stock.

The shares received another boost on 23 December when the company said it would be opening an independent review into allegations against its accounting practices made by the short seller.

Muddy Waters, however, remained unconvinced by the firms efforts, saying on Christmas Eve that such reviews were “usually exercises in whitewashing that provide little to no transparency or accountability", highlighting similar moves by companys such as commodities trader Noble Group and Chinese forest plantation group Sino-Forest which were “exonerated by their purportedly independent reviews, only to collapse later”.

The back-and-froth continued over the Christmas and New Year period, with the share price continuing to edge downwards.

NMCs misery was compounded on 8 January as its two largest shareholders unveiled plans to sell off a £373mln stake to cover their debts.

Abu Dhabi investors Saeed Mohamed Butti Mohamed Khalfan Al Qebaisi and Khalifa Bin Butti owned 17.4% and 15% holdings in the firm before the sale. The fact that Khalifa Bin Butti was NMCs executive vice-chairman also worsened things on the PR front.

Matters escalated when the company brought in Louis Freeh, a former federal judge and Federal Bureau of Investigations (FBI) director, and his firm Freeh Group to examine and compile a report regarding allegations raised in the Muddy Waters report.

However, the news failed to stop other major shareholders dashing for the exit, with Emirates NBD, a bank owned by the Dubai government, offloading a 1.04% stake in the group for £27mln in late January.

As the year moved into February, it became the turn of the firms directors to head for the door.

Aforementioned executive vice-Read More – Source

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