Olam shares recover amid war of words with critic

Shares in farm commodities trader Olam International recovered on Wednesday despite a war of words with an influential US short-seller who said the firm was in danger of collapse.

Olam closed more than five percent higher at Sg$1.6950 in heavy trading after shedding 7.5 percent on Tuesday, when it called a temporary trading halt in reaction to criticism from Muddy Waters Research.

Carson Block, founder of Muddy Waters, told an investment conference in London on Monday that Olam could collapse due to its debt load and other factors.

An indignant Olam hinted at possible legal action on Tuesday and followed it up with a conference call by chief executive Sunny Verghese vigorously defending the firm.

Muddy Waters on Wednesday issued an open letter to Verghese and Olam's board standing by its position.

"Olam's disproportionate reaction is extraordinary in our experience," it said, adding that "you and your investors should note that attempting to silence critics is not a plan of corrective action".

Eugene Ng, an investment analyst at UOB Kay Hian Research, said the absence of a full report from Muddy Waters allayed investor panic.

"Currently they only issued a letter to Olam and I guess after people have read the letter, they don't think it's anything substantial," he told AFP.

"So now, some of the panic and fear that was experienced by the market yesterday, I guess that has reversed and that's why probably (Olam stock) came back today," he told AFP.

Olam sources 44 products from 65 countries and supplies them to more than 11,600 customers. Key products include cocoa, coffee, cashew, sesame, rice, and cotton and wood products.

Singapore's state investment firm Temasek Holdings is one of Olam's biggest shareholders, owning 16 percent of it as of March 31, according to Temasek's website.

Block's assessments of companies have been closely monitored, especially after Chinese timber supplier Sino-Forest Corp. filed for bankruptcy protection after a 2011 Muddy Waters report questioned the value of its assets.

Olam listed in Singapore in 2005 and is one of the 40 largest companies on the city-state's index in terms of market capitalisation.

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