Short-sellers cause Noble shares to plunge 14%

Grim day for firm as prices reach 7-year low, SGX hits it with "trade with caution" notice

The company logo of Noble Group.
The company logo of Noble Group. PHOTO: REUTERS

Short-sellers zeroed in on embattled commodities firm Noble Group yesterday to send the blue chip crashing to a new seven-year low.

Its shares plunged as much as 14 per cent in late afternoon trade before closing at 52 cents, down seven cents or 12 per cent, with 138.4 million shares changing hands. That is the lowest price since November 2008 and caps a difficult few months for the stock as the firm tries to fend off attacks over its accounting methods, amid a slump in the commodities market and slowing Chinese demand.

"Short-selling pressure has been building up over the past few days, and when the buying forces could not be sustained, the pressure finally took its toll on prices," said a local remisier.

An already grim day for Noble was made worse when the Singapore Exchange yesterday hit it with a "trade with caution" notice over unusual trading activity earlier in the day. Noble, which has now received three such queries over the past six months, said it has no explanation for the trading activity.

The firm declined to comment on its share price decline.


"Noble's financial reporting has been a magic show performed every quarter for one specific audience: the credit agencies."


Noble has been aggressively buying back its own stock to shore up investor confidence, investing US$131 million (S$179 billion) since last month, according to Bloomberg, but it appears to be fighting a losing battle. The shares have fallen 24 per cent since June 12.

Noble remains the most short-sold stock on The Strait Times Index, according to Markit Group data compiled by Bloomberg, which suggests a large body of investors believe the shares will fall further. The Hong Kong-based company has hired auditing giant PwC to review its practices. The findings are due out on Aug 13, after Noble releases its second-quarter earnings.

But the anonymous group Iceberg Research, which has been attacking Noble's practices since February, dismissed the company's moves as inadequate last week.

Maybank Kim Eng analyst Wei Bin said in a report yesterday: "If a company buys back shares aggressively, it should be a positive for the share price."

But in this case, he said, it is exactly the opposite because of market concerns that its credit rating may be downgraded.

Standard & Poor's changed Noble's outlook last month from "stable" to "negative". The Iceberg report, released on July 21, called this revision "the most important development".

Said the report: "If Noble is downgraded to junk status, this group will have substantial margin calls and its cost of funding will increase dramatically. The rating, not the share price, has been the main reason why Noble has manipulated its financials. Noble's financial reporting has been a magic show performed every quarter for one specific audience: the credit agencies."

A version of this article appeared in the print edition of The Straits Times on July 31, 2015, with the headline 'Short-sellers cause Noble shares to plunge 14%'. Subscribe