Muddy Waters

Muddy Waters Research are a US based short seller and publisher of reports that question the accuracy of some companies accounts.

Question is a quite mild description, there is a willingness to just stay on the right side of the law but make it perfectly clear to the reader that they are calling something a lie, a deliberate attempt to mislead or just outright fraud.

It appears that when such a report is compiled MW take a short position in that company's shares and then release the report hopefully from MW's perspective causing a large share price drop.

This is a quite tricky thing to do lawfully as it can be close to market manipulation, so far the regulators have not seen fit to intervene as the MW's documents contain facts or reasonable interpretations of facts.

This is all very interesting but is this information useful a UK Retail Investor, once it is available to be read by a private investor the market will have already read it and adjusted the relevant share price downwards.

My experience so far is that there a drop in share price for a day, two or three rather than a drop before the market opens and a recovery on the same day.

Lessons

Understand the company, the market sector and the financial performance of the companies that you are buying.

Do not buy companies just because a share price chart suggests that the price will continue to rise.

The MW reports seem to have had a significant affect because they are either right or credible and the companies that they report on are enjoying a high share price because they have a high price and "great opportunities in the future" so investors are buying them because of the this not last years results.

Events

17 Dec 2019 - NMC Health (NMC)    MW Report   Commentary   Google SP
3 Months Before Announcement Range: 1,800p - 2,800p
Immediate Low: 1200p
5 Day After Announcement Range: 1,600p - 1,800p
Price @ 2 Jan 2020: 1757p
NMC are a health care business initially based in and around the UAE but are now expanding world wide.

After only a few days the share price was already back to the level of mid Aug 2019 which was a short term trough. The group has been expanding rapidly so this price is also a 2 and a half year low.

As of Dec 2019, it seems that the MW analysis hasn't totally stuck, but we need a few more weeks to safely draw a conclusion.



7 Aug 2019 - Burford Capital (BUR)   MW Report   Google SP
3 Months Before Announcement Range: 1,500p - 1,600p
Immediate Low: 600p
5 Day After Announcement Range: 700p - 800p
3 Months After Announcement Range: 600p - 950p
Price @ 2 Jan 2020: 699p

Burford Capital finances legal actions, including one that could result in a billion dollar settlement against the Argentine Government for the nationalisation of YPF, the state run oil company.

Burford have sold a share of about 40% of the expected settelment fee for $140 million.

Their main revenue sources are part of the settlement when they win cases and selling parts of the possible settlement in ongoing cases as they move closer to a possible win.

After the report the share price settled down at around half of the pre analyse price.



8 Feb 2018 - IQE (IQE) MW Report   Commentary   Google SP
3 Months Before Announcement Range: 100p - 170p
Immediate Low: 100p
5 Day After Announcement Range: 100p - 105p
3 Months After Announcement Range: 108p - 120p
Price @ 2 Jan 2020: 51p
IQE manufacture wafers which are basis of chips used in the telecoms and wireless industries.

The share price has been on consistent downward trend since the report was published

The MW analysis seemed to coincide with a general share price drop, possibly as a result of a report from ShadowFall who according to their website specialise in ...exposing situations where market value exceeds intrinsic value.

Background

The MW reports seem to have had a significant affect because of two factors.

They are either correct or credible.

And

The companies that they report on are enjoying a high share price because they have a high price and "great opportunities in the future".