NMC Health is the largest private healthcare provider in the United Arab Emirates. The company owns and manages over 200 healthcare facilities that include hospitals, medical centres, long-term care facilities, day surgery centres and fertility centres, and has a team of over 2,000 doctors and 20,000 paramedical and support personnel. The company is listed on the London Stock Exchange and currently has a market capitalisation of £1.6 billion.
NMC Health’s share price has fallen significantly since mid-December after prominent short-seller Muddy Waters released a damning 34-page report on the healthcare company – accusing NMC of accounting fraud and corporate governance failings – and announced that it had taken a short position. In the highly critical report, Muddy Waters said it has “serious doubts” about the company’s financial statements and that it believes NMC has “manipulated its balance sheet to understate debt.”
Source: 2iQ Research
Examining insider transaction activity, we think it’s concerning that a number of insiders at NMC have sold a large amount of stock recently. Since Muddy Waters published its report on the group, we have observed large sales from Founder and Chairman Bavaguthu Raghuram Shetty (approximately £110 million worth of stock), Vice Chairman Khalifa Al Muhairi (approximately £55 million worth of stock) – who has since resigned – and major shareholder Saeed Mohamed Butti Mohamed Khalfan Al Qebais (approximately £320 million worth of stock). This level of insider selling does not look good for NMC, in our view. Accordingly, we think the stock is best avoided right now.