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(Bloomberg) — NMC Health Plc, a hospital operator targeted by short seller Muddy Waters, said founder Bavaguthu Raghuram Shetty resigned amid investor concern he faced a margin call and misrepresented his stake.<\/p>\n
The board asked for Co-Chairman Shetty\u2019s resignation and it takes effect immediately, according to a person with knowledge of the situation. NMC has lost four board members since Friday, including Vice Chairman Khaleefa Butti, whose holdings are also being probed. The stock, the worst performer on the FTSE-100 Index this year, fell as much as 9.2% Monday morning and then rebounded.<\/p>\n
\u201cThe resignation of senior board members should be viewed positively,\u201d said Abdulla Nahlawi, an analyst at Rasmala Investment Bank in Dubai. \u201cThe credibility of the current board has been jeopardized with the unfolding of the recent events.\u201d<\/p>\n
NMC shares lost almost half their value the first week of February on speculation the company\u2019s main investors faced a margin call, in which banks seize shares pledged as collateral. NMC said Friday that First Abu Dhabi Bank and Al Salam Bank Bahrain obtained 20 million shares in the company from BRS International Holding, an investment vehicle of NMC\u2019s top shareholders. The banks sold more than 8 million of those shares as \u201cenforcement of security,\u201d NMC said.<\/p>\n
NMC operates the largest medical network in the United Arab Emirates and in 2012 became the first Abu Dhabi company to list in London. The shares started teetering in mid-December when Muddy Waters alleged that NMC manipulated its balance sheet and inflated the prices of companies it acquired.<\/p>\n
Shetty, 77, was born in India and founded NMC in the 1970s after moving to Abu Dhabi. His spokesman said a legal review of the situation is ongoing and declined further comment.<\/p>\n
Chief Investment Officer Hani Buttikhi and board member Abdulrahman Basaddiq also stepped down because they were appointees of Shetty and Butti, NMC said, adding that they had no knowledge of the share transfers.<\/p>\n
Questions remain over the role of Shetty\u2019s family at the company. His wife and son-in-law both hold roles in senior management.<\/p>\n
Almost 10% of NMC\u2019s freely traded shares are shorted, according to Markit Securities data. In mid-December about a third of them were.<\/p>\n
Last week GKSD Investment, an investment company backed by hospital investors, said it\u2019s studying a possible offer for NMC. Under U.K. takeover rules, it has until March 9 to make a bid.<\/p>\n
NMC has said Muddy Waters\u2019s claims are false and the company hired former FBI Director Louis Freeh to conduct an independent review. The review is due to be completed before the company issues its financial results in March, the person said.<\/p>\n
NMC said Mark Tompkins will continue as the company\u2019s sole chairman.<\/p>\n
(Updates with more details on Shetty\u2019s resignation from second paragraph)<\/p>\n
–With assistance from Lisa Pham.<\/p>\n
To contact the reporters on this story: Suzi Ring in London at sring5@bloomberg.net;Filipe Pacheco in Dubai at fpacheco4@bloomberg.net<\/p>\n
To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Thomas Mulier, Anne Pollak<\/p>\n
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