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Muddy Waters, Krupa Global Investments Spar Over NMC Health

Krupa threatened to file complaints with the U.S. and U.K. governments against Carson Block's firm on Friday.

A battle between two activist investors erupted on Friday over a United Arab Emirates healthcare company called NMC Health.  

Czech activist investor Krupa Global Investments, which owns a one-million-share stake in NMC, said Friday that it is preparing to file a complaint with the U.K.’s Financial Conduct Authority and the Federal Bureau of Investigation in the U.S. against activist short-seller Muddy Waters Capital, which in December announced it was shorting NMC. 

Krupa wants Muddy Waters to be investigated for “baseless and false” allegations against target companies. According to Krupa’s announcement, Muddy Waters is publishing “misleading and manipulative information” on companies like NMC Health and litigation finance firm Burford Capital.  

Krupa also accused Muddy Waters of cooperating with other hedge funds to pressure stock prices through illegal spoofing, an allegation previously raised by Burford Capital.  

“These activities harm shareholders, pension funds, and institutions who manage [the] money of retail investors,” the letter said.  

Muddy Waters responded quickly on Twitter: “Muddy Waters Capital LLC wishes to respond formally to accusations publicly leveled against it today — by a fund nobody has ever heard of.” The tweet continued, “Stupid is as stupid does.” 

Pavol Krúpa, the firm’s founder, responded, asking for Muddy Waters to “at least” give the firm a shout out on Twitter, then pointing out that the firm previously worked with legendary investor Carl Icahn, attaching a photo of the two together to the tweet. “Nice try, Forrest,” Krúpa added.  

Hayman Capital Management founder Kyle Bass joined the fray in support of Muddy Waters: “Carson and his team are some of the best investigative investors that have ever lived. I’m with you, Carson. #TruthHurts.” 

The Twitter spat comes less than two months after Krupa praised Muddy Waters in December for its report on NMC Health. According to that announcement, which said that Krupa supported a report from Muddy Waters criticizing NMC over accounting irregularities: “In our opinion, Muddy Waters’ allegations are serious, possibly true and management have not disclosed any relevant explanation for shareholders yet.” 

In that report, Muddy Waters said that the firm was “unsure how deep the rot at NMC goes, but we do not believe that its insiders or financials can be trusted.” NMC has called the allegations “outright false” in press statements.

NMC’s shares lost nearly 20 percent of their value from market close on Friday, January 31 close at £1,292 (USD $1,665.70) per share to £1,036 by the end of the day on Monday.   

On Tuesday, NMC issued a statement confirming that it knew “no specific reason for the fall,” but it added that an ongoing independent review of the company by risk management firm Freeh Group International Solutions is moving forward. NMC could not be reached for comment Friday.

[II Deep Dive: Muddy Waters Stands by Allegations Against Litigation Finance Firm]

Muddy Waters responded quickly on Twitter, saying that the firm had a hard time believing that NMC did not know why the firm fell.   

“There are three major shareholders, each of whom are seemingly margined to the hilt,” according to the tweet. “None of their stock was dumped yesterday???”  

Since then, NMC shares have fallen further, reaching £905.58 by the end of the day on Thursday, a more than 12 percent decline since the end of Monday. And on Friday, shares continued to lurch downward.   

“KGI sees this recent drop in share price as further buying opportunity,” according to Krupa’s Friday statement. 

Krupa called on other shareholders at companies like Burford and NMC to join its complaint. The firm said it is preparing to take legal steps to “seek compensation for damages” specific to the NMC Health case. The firm said it also plans to hire an investigator to analyze Muddy Waters’ actions. Muddy Waters declined to comment beyond the tweets. 

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