Olam International Ltd., the commodity trader that Muddy Waters LLC says may fail, is facing “exaggerated” allegations about its accounting, said Dwight Anderson, founder of commodity and industry hedge fund Ospraie Management LLC.
Olam has declined 13 percent in Singapore since Nov. 19, the day Muddy Waters founder Carson Block said the trader had “accounting gaffes” that may be indicative of fraud. Short-seller Block has valued Olam’s debt at 14 to 33 cents on the dollar.
“I don’t think he’s right where the assets are going to be worth cents on the debt’s dollar,” Anderson said on Bloomberg Television’s “Market Makers” with Stephanie Ruhle and Erik Schatzker yesterday. Anderson’s Ospraie, based in New York, manages about $1 billion. “They have been aggressive in accounting but fraudulent, the extent that he’s talked about, I think is more exaggerated than reality.”
Olam, the world’s second-largest rice trader, and Muddy Waters, a research company led by short-seller Block, have argued about whether the company is solvent since Block said last month he expected the company to fail due to mounting debts. Block said he was selling Singapore-based Olam’s shares short -- borrowing them to profit by buying them at a lower price later.
Muddy Waters rated Olam a strong sell in a 133-page report posted on its website last month, saying it values Olam on a “liquidation basis, because our opinion is that it is likely to fail.”
Olam dropped 9.1 percent to $1.20 in over-the-counter trading in New York yesterday.
“Olam has produced some of the worst accounting gaffes we’ve ever seen, in both the quantity and substance of these revisions,” according to Muddy Waters’ Nov. 26 report. “Olam’s accounting track record, at the very least, strongly suggests incompetence (to say nothing of calling its risk management claims into question). At worst, these issues could be indicative of fraud.”
Olam sued Muddy Waters and Block in Singapore on Nov. 21.
Zach Kouwe, a spokesman for Muddy Waters who works for Dukas Public Relations Inc. in New York, declined to comment on Anderson’s statements.
Louis Dreyfus Corp. is the biggest rice trader, according to its website.