(Bloomberg) –NMC Health Plc shares tumbled the most on record after the hospital operator became the latest target of short seller Carson Block’s Muddy Waters Capital LLC.
The health-care company’s financial statements hint at potential overpayment for assets, inflated cash balances and understated debt, according to a report on Muddy Waters’s website. Shares of NMC Health fell 32% Tuesday in London, wiping out about 1.8 billion pounds ($2.4 billion) in market value. Company representatives declined to comment.

Financial services company Finablr Plc, which listed in May, fell 11%, while the benchmark FTSE 100 Index ended the day little changed. Both NMC Health and Finablr were founded by Abu Dhabi-based billionaire Bavaguthu Raghuram Shetty.

NMC Health falls the most on record after Muddy Waters says it’s short the stock
NMC appears to have overpaid for its investment in redeveloping an Abu Dhabi hospital and for a stake in Premier Care Home Medical and Health Care LLC, the report said. Its margins also appear too high in comparison with rivals like Mediclinic International Plc, according to Muddy Waters. Cash balances are high in relation to the amount of interest the company has reported earning, the short seller said.

NMC Health reported a gross adjusted margin of 41% in 2018, close to Mediclinic’s 38%, according to data compiled by Bloomberg. The company’s operating margin of 19%, however, vastly exceeded Mediclinic’s 2.7% and Aster DM Healthcare Ltd.’s 7.1%, the data show.

NMC’s $450 million convertible bonds due April 2025 dropped almost 10 cents on the dollar to 79 cents, the lowest level since August, according to data compiled by Bloomberg.

The short report is “shallow and baseless,” said Ali El Adou, head of asset management at Daman Investments in Dubai. NMC’s plan to buy back as much as $90 million of its senior unsecured guaranteed convertible bonds due 2025 “reflects that the balance sheet’s liquidity is not stretched,” he said.

A native of southwest India, Shetty moved to Abu Dhabi in 1973 and founded NMC in 1975. It’s now the U.A.E’s biggest private health-care provider.

Before Tuesday’s report, NMC’s shares had risen more than twelve-fold since listing. They peaked last year after joining a select group of companies in the Arab world worth more than $10 billion.

Today’s drop wipes out all gains since August, when the shares tumbled on speculation that Muddy Waters was shorting them. Muddy Waters’s target turned out to be litigation-finance company Burford Capital Ltd., which lost more than a third of its value since the short seller reported concerns about the company.

Muddy Waters targets NMC Health after sending Burford shares lower
Analysts are overwhelmingly bullish on NMC Health, with 12 of those tracked by Bloomberg rating the stock buy or an equivalent. Jefferies analyst James Vane-Tempest is the lone bear with an underperform rating. The average 12-month price target is 3,706.5 pence, according to a Bloomberg consensus of analyst estimates, suggesting a return potential of more than double the current price.

Muddy Waters didn’t disclose the size of its short position in NMC Health in the report. Bearish speculators had sold short about 25% of the shares available for trading as of Dec. 16, according to data compiled by IHS Markit Ltd. Short sellers seek to benefit from a decline in a company’s share price.

The U.K.’s Financial Conduct Authority, the financial regulator, declined to comment on NMC Health.

–With assistance from Erin Roman, Morwenna Coniam, Anthony Aarons, Shaji Mathew and Luca Casiraghi.