Editor’s note: A link has been added near the end of this article (it’s given in italics) for a separate piece which talks about Iceberg Research’s views on Noble Group’s debt levels. Last weekend, the little known blogger Iceberg-Research issued its third report on commodities trader Noble Group Limited (SGX: N21). The report discussed Iceberg Research’s issues with Noble Group’s corporate governance and the possibility of the company understating its debt level. (More’s to come on the third report shortly.) As for the previous two reports, I’ve taken a look at them previously and you can find my thoughts on…
Editor’s note: A link has been added near the end of this article (it’s given in italics) for a separate piece which talks about Iceberg Research’s views on Noble Group’s debt levels.
Last weekend, the little known blogger Iceberg-Research issued its third report on commodities trader Noble Group Limited (SGX: N21).
The report discussed Iceberg Research’s issues with Noble Group’s corporate governance and the possibility of the company understating its debt level. (More’s to come on the third report shortly.)
As for the previous two reports, I’ve taken a look at them previously and you can find my thoughts on the reports in here. Noble Group has responded to Iceberg Research’s third report, stating in an official announcement: “We reject their allegations as inaccurate, unreliable and misleading.”
In addition, the company also revealed in the same announcement that it has decided to start legal proceedings against Arnaud Vagner and Enlighten Ace Ltd for “conspiracy to injure Noble Group.”
Judging from the sequence of events thus far, one might assume that Vagner, a former credit analyst for Noble Group, has a relationship with Iceberg Research. It must be noted though, that Noble Group has not drawn any explicit links between the duo of Vagner and Enlighten Ace and Iceberg Research.
With all that as a backdrop, let’s take a look into some of the details of Iceberg Research’s third report.
Board of captive directors?
According to Iceberg Research, there’s a red flag about Noble Group on the issue of whether its independent directors are really independent.
The report claims that although Noble Group has eight independent directors on its Board, the average tenure for its independent directors is more than 10 years each.
In fact, the report also stated that two of Noble Group’s independent directors have been on the board for more than 19 years. Iceberg Research claims that it is unlikely that independent directors can remain truly independent with such a long tenure at a company.
The report also goes on to suggest that because the independent directors are compensated with shares options, there is a real incentive for the independent directors to want to see a higher share price in Noble Group, which might in turn influence their independence.
Insiders fleeing the scene?
More disturbingly, Iceberg Research stated that many of the company’s insiders have been cashing out while some have resigned.
Notable examples of insiders cashing out include 1) Harry Banga, co-founder of Noble, selling all his shares in 2013 and 2) CIC, a Chinese sovereign fund, reducing its stake in Noble Group from 13.8% to 9.4% back in 2014.
As for the resignation of insiders, Iceberg Research pointed out that “in just two years, the head of risk changed five times. This is extremely uncommon.”
The things that Iceberg Research had pointed out does not bode well for Noble Group’s public image.
However, we have to be cautious when it comes to the negative implications that Iceberg Research has drawn out from all the happenings that’s taking place at Noble Group – the negative implications are just opinions, not facts.
In Noble Group’s announcement about the lawsuit, it also stated that “Iceberg are not the independent research house they claim to be. Their actions, and their timing, have been calculated primarily to inflict damage rather than to facilitate the distribution of research.”
But that said, Noble Group might need to do a lot more beyond its current lawsuit and its previous 10-point rebuttal to Iceberg Research’s first two reports to repair its public image.
I’d be looking at other claims that Iceberg Research have made about Noble Group, so stay tuned.
Addition: Jump in here to check out Iceberg Research’s claims about Noble Group’s debt levels.
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