NMC/advisers: the companies they keep
Well-paid toil of bankers, brokers and bean counters has proved of little value to investors
The single most important number an investor should know? For the billionaire founder of NMC Health it was the size of his shareholding. BR Shetty resigned from the board of the Abu Dhabi-based hospital operator on Monday, taking two executives with him. Mr Shetty’s departure follows claims from his co-chairman that the entrepreneur incorrectly reported his shareholding.
London’s popularity as a venue for foreign listings comes at a cost. Unfamiliar businesses require investors to take more on trust. Listing rules — widely criticised in this case — provide one backstop. The reputation of local advisers is another soft guarantee. Their credibility suffers collateral damage when the client they vouch for suffers a governance implosion.
A gold-plated bevy of banks, brokers, bean counters and lawyers has worked for NMC over the years. They include Deutsche Bank, JPMorgan, Numis, EY, Allen & Overy and Clifford Chance. Some have spent thousands of hours preparing documents on which investors depended, including bumf for the 2012 flotation.
That well-paid toil has proved of little value to investors. There is something badly wrong with the governance of a business where a powerful director took out loans secured on shares, some of which may then have gone walkabout.
Adding to investor woes, Carson Block, the short seller that nervous chief executives see as the Fifth Horseman of the Apocalypse, rode into town in December. He claims NMC inflated cash flows and understated debt. NMC denies claim but shares in the group have still dropped 70 per cent. Finablr, another UK-listed business set up by Mr Shetty, is tainted by association. The stock of the group, which owns foreign currency retailer Travelex, is down 65 per cent.
The Financial Conduct Authority is investigating the conduct of Mr Shetty and his associates. Accounting authorities may probe the quality of audits at their usual leisurely pace. None of this helps shareholders who have lost their shirts. Some had already forfeited their jackets during the governance implosions of foreign miners Bumi and ENRC.
Investors should take an appropriately sceptical view of new financings brought to them by NMC’s advisers. Professional services firms are not taxis. They can turn down clients whose credibility they doubt. Banks, brokers and accountants who avoided NMC should congratulate themselves on their foresight.