Noble's price falls despite $28m share buyback

Fourth buyback this month fails to lift counter; short-selling picks up

NOBLE Group yesterday announced its fourth share buyback since last week in a bid to stem its precipitous share price fall.

But the latest move had little impact as the counter still slumped 3.5 cents or 4.9 per cent to close at 68 cents.

The mainboard-listed commodity giant forked out $28.43 million to buy 39.74 million of its own shares, according to an announcement to the Singapore Exchange yesterday.

The buyback strategy is aimed at reducing outstanding shares to sustain or boost share value.

Its first buyback was on June 11, with three more since then - all part of moves to combat short-selling and the latest wave of criticism over its financials.

Since February, an outfit called Iceberg Research has released a series of disparaging reports alleging accounting fraud at Noble.

The claims were back in the spotlight this month following scathing remarks by former Morgan Stanley banker Michael Dee, who slammed Noble's financials as dubious and called for Noble chairman Richard Elman to resign. In response, chief executive Yusuf Alireza and Mr Elman have launched a public defensive campaign against the critics. This included an open letter by Mr Alireza on Wednesday to debunk Mr Dee's claims.

Amid all this, Noble continues to be pressured by short-selling, which has picked up substantially since mid-April, averaging about 20 to 30 per cent of Noble's daily traded volumes, Jefferies Singapore said in a note last week.

Short-sellers were still hounding Noble as of Wednesday, when short-sell volume reached over 37 million shares - about half of Noble's trading volume that day.

But share buybacks are not going to help Noble solve its issues, CMC Markets analyst Nicholas Teo cautioned.

"Share buybacks are just a quick fix to the problems. If I were an investor, I would want my company to spend money on its business, not on buying back shares, which tends to benefit big shareholders more because this improves their net worth."

Following the latest buyback, Noble has acquired 102.71 million shares, just a fraction of the maximum 673.94 million shares the management is authorised to buy.

"Looking at this quota, the market is likely expecting further buybacks.

Repeated buybacks will create the impression that investors who want to exit can always count on a big institutional buyer for a get-out-of-jail card. None of this will help improve sentiments," Mr Teo said.

A version of this article appeared in the print edition of The Straits Times on June 19, 2015, with the headline 'Noble's price falls despite $28m share buyback'. Print Edition | Subscribe