The 3 Cs of defending a siege from short-sellers

IN RECENT months, commodities supply chain manager Noble Group Limited has found itself the target of short-selling research firms. Noble's woes began in February this year with anonymous blogger Iceberg Research publishing a three-part report alleging, among other things, that Noble had "exploit(ed) the accounting treatment of its associates to avoid large impairments and fabricate profit". Short-seller Muddy Waters joined the fray in April, issuing its own report while concurrently making public its short-sell position on Noble shares.

This is not the first time that companies listed on the Singapore Exchange (SGX) have been under siege from short-sellers - Olam International and China Minzhong Food Corp were involved in similar high-profile incidents. In Noble's case, the short-sellers' reports have had a direct and sustained impact on Noble's share prices, which dropped from S$1.20 in February to below S$0.47 on Aug 3. That day, Noble saw its biggest monthly drop in share price in 16 years in what the company perceived to be "an attempt to manipulate (its) share price".

One point that can be gleaned from the experiences of Olam and China Minzhong is that companies under siege from short-sellers have little or no effective legal recourse. So what can companies do to defend themselves from the heavy artillery of short-sellers?