Noble Group Ltd., the commodity trader whose accounting has been criticized by research companies including short-seller Muddy Waters LLC, said it will make its financial reports more transparent starting next month.
The “exact nature and format” of additional disclosures is still being determined, the Hong Kong-based company said in a statement. The changes will take place from May 7, when it reports first-quarter financial results.
The company said it may give more details on the fair value of its assets, an area that was characterized by Muddy Waters and an anonymous group calling itself Iceberg Research as lacking in transparency and yet integral to Noble’s profits.
“It is encouraging that Noble has come out this morning” with promises of wider disclosure, Nicholas Teo, an analyst at CMC Markets in Singapore, said in a note to investors. Still, the added focus on Noble’s accounts has increased concern over the company’s debt, he said.
Noble’s credit default swaps, a measure of the risk that a company won’t repay its debts, rose to 430 points as of April 21 from 345 points a week earlier, according to CMA data compiled by Bloomberg.
Addressing Iceberg and Muddy Waters criticism that it uses repurchase agreements to minimize debt, Noble said it engages in inventory sales to banks that are “normal industry practice.” This differs from a repurchase, or repo, contracts in that the company doesn’t have an obligation to repurchase the inventory, Noble said.
The trading company said disclosure of such inventory sales is not required under International Financial Reporting Standards accounting rules.
Noble’s shares rose 1.2 percent to 88 Singapore cents at 10:22 a.m. As of yesterday’s Singapore close, its stock was down 28 percent since Iceberg published its first report on Feb. 15. The Singapore Straits Times Index was up 2.4 percent over the same period.
The short interest in Noble’s stock is now the third-highest on the STI, behind Singapore Press Holdings Ltd. and Sembcorp Marine Ltd., according to Markit Group Ltd. data compiled by Bloomberg.
Short wagers are when an investor borrows and then sells a company’s stock, speculating that its price will fall and allow the repurchase of the shares at a lower price.
Noble today also rejected media reports that it evaded questions from shareholders at its annual general meeting last week.