Thursday 13 February 2020 2:41 pm

NMC Health shares tumble on double downgrade from Societe Generale

Shares in NMC Health fell as much as 11 per cent on Thursday after the embattled hospital operator was hit with a double rating downgrade from Societe Generale. 

Analysts at the French bank slashed NMC’s price target by 85 per cent, saying that confidence in the company, the biggest healthcare operator in the United Arab Emirates, is “broken”. 

Read more: KKR denies approaching embattled NMC Health on possible offer

“We conclude that a board reset and a full audit are needed to restore investor confidence,” Societe Generale analysts wrote, downgrading the FTSE 100 firm from a “buy” to a “sell”. 

NMC shares have swung sharply in recent sessions, and are overall down 69 per cent since US short-seller Muddy Waters published a report questioning the company’s finances and management in December. 

Earlier this week, the Financial Conduct Authority (FCA) confirmed it had launched a probe into NMC Health after the company announced it was seeking clarification from major shareholders over the size of their stakes in NMC.

Founder and co-chairman BR Shetty and another board member have been asked to step back from the company’s board as its other directors attempt to establish who owns the private healthcare provider.

NMC shares recovered their losses over the course of the day, and had risen as much as 2.79 per cent by 2.30pm.

“Enough is enough,” wrote the Societe Generale analysts. “We cannot invalidate [Muddy Waters] accounting claims with what we know, while the lack of clarity on the corporate ownership front is unacceptable.”

In its December report, Muddy Waters alleged that NMC manipulated its balance sheet and had inflated the price of assets it purchased.

NMC says the allegations are false, and has hired former FBI director Louis Freeh to investigate the allegations. 

The 12-month price target of 590p implies a 31 per cent downside on NMC’s closing price yesterday.

Before Muddy Waters published its report, NMC had 12 buy ratings, alongside one sell and no hold recommendations, according to Bloomberg data. 

Read more: Investment firms circle for embattled NMC Health

The company now has four buy and two sell ratings, with no hold recommendations. Several analysts have suspended or restricted their coverage after it emerged earlier this week that NMC could be subject to possible takeover bids. 

US investment firm KKR ruled out a possible takeover the day after NMC said it had been approached by the firm, while GK Investment Holding said it was in the preliminary stages of considering an offer.