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June 9, 2015 5:59 pm

Noble shares fall as critic calls for chairman’s resignation

Neil Hume and David Sheppard in London

Noble chief executive Yusuf Alireza has defended the commodities trader’s accounting practices

Noble Group shares fell to their lowest level since 2009 after a former Morgan Stanley executive launched a broadside against Asia’s biggest commodities trader and analysts raise questions about its finances.Michael Dee, former head of Morgan Stanley’s southeast Asia business called late on Tuesday for Richard Elman, Noble’s septuagenarian founder and chairman, to resign. Mr Dee had attacked the group’s management at the end of last month

Noble’s share price fell 6 per cent on Tuesday, to close at S$0.66. The stock of the company, which is based in Hong Kong, has fallen more than 40 per cent since February when a mysterious group calling itself Iceberg Research issued the first of a series of critical reports about Noble.

Iceberg claims that Noble’s debt load is higher than reported, and that management has used valuation estimates, permitted under accounting rules, which flatter the company’s results. Similar allegations have been made by Muddy Waters, the US short seller.

Noble’s chief executive Yusuf Alireza, a former Goldman Sachs banker, has mounted a robust defence of how it books profits on long-term contracts and in April promised more transparency.

Noble reported a profit in its latest quarterly results, published in May, and sought to reassure shareholders by providing new disclosures of gains and losses on its long-term contracts.

The commodities trader said in February that a disgruntled former employee was behind Iceberg but the company’s share price has continued to fall, despite Mr Elman increasing his stake in March and the group successfully refinancing a $2.3bn loan facility with international banks in May.

Analysts and traders said the latest stock sell-off had been triggered by several factors.

Mr Dee wrote an open memo to Noble’s employees on May 29 criticising the company’s management, not just for the response to Iceberg’s allegations but also the underperformance of its shares relative to the broader market.

“The market is telling you that something is very wrong at your company and I’m telling you time is running short to fix it,” Mr Dee said in the memo, adding that he had no personal stake in the company’s fortunes.

“Only straight answers to simple questions can begin to repair the damage to Noble’s share price.”

40%

Fall in Noble Group’s share price since February

Noble declined to comment on Mr Dee’s memo or the share price weakness.

The $2.3bn revolving credit facility has also come under scrutiny from analysts and traders after at least three tranches of the three-year loan were offered to other banks in the secondary market.

“”It could indicate the banks may be losing some confidence in the company,” said Wei Bin, analyst at Maybank Kim Eng in Singapore.

A hedge fund manager said the latest sell-off was notable because it was accompanied by large daily trading volumes.

“It is now trading in such volume it appears some of the major shareholders are changing their view on the stock,” said Robert Medd at GMT Research, an independent research firm. GMT has published several reports critical of Noble.