Tough to follow Olam's path out of shortseller hell

A STRATEGIC investor willing to pay a premium is, by most measures, a pretty good way for Olam International to wash off the taint of Muddy Waters. But Olam's journey through Purgatory may not be an easily repeated trek for other companies hoping to escape their own hostile-shortseller hell.

Olam, a soft commodity trader, said on Friday that Mitsubishi Corp was taking a 20 per cent stake at S$2.75 per share, a hefty 44 per cent premium to Olam's Thursday last traded price of S$1.91. The news sent Olam's shares rallying 8.4 per cent to S$2.07, about 20 per cent above where the stock was trading right before shortseller Muddy Waters issued a critical report in 2012. If there was any lingering stain on the counter from Muddy Waters, Friday's development probably cleared it up.

The Mitsubishi deal appears to be a good fit for both parties. For Olam, the cash injection gives it the elbow room to stick with its acquisition strategy. Mitsubishi gets board representation in a new partner that has access to emerging markets such as Africa. And both sides can partake in what looks to be a common view on the future of the industry and of Olam's longer-gestating investments.