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Is This The Beginning Of A More Transparent Noble Group Limited?

After months of negative news surrounding it, things may finally be looking up for commodities trader Noble Group Limited (SGX: N21).

The company’s share price has been hit hard in recent months after reports criticizing its business and accounting practices were first released in mid-February this year by little-known research outfit Iceberg Research (Noble believes a former employee is behind Iceberg Research). Short-seller Muddy Waters then subsequently released its own negative reports on Noble a few months later and exacerbated the company’s pain .

Although Noble has rebuked its critics’ claims and has issued many statements and letters to clarify the allegations, the actions have – as alluded to earlier – not been able to prevent its share price from declining by 40% since the first of those reports were released.

Noble’s latest action to rebuff its critics was announced earlier today:  The company has launched an independent review into its accounting practices, with a focus on its mark-to-market calculations; this particular aspect of the company’s accounting had come under heavy criticism from its critics.

Noble will be assigning four non-executive directors and PricewaterhouseCoopers LLC to lead the review. This might be a good start for the company in its quest to repair its reputation and regain the trust of its stakeholders.

Warren Buffett once commented on the importance of having a shining reputation in the business world:

“Lose money for the firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.”

Judging from the way Noble’s share price has declined, it’s not unreasonable to assume that Noble’s reputation has been badly damaged over these past few months. Although mending hits to one’s reputation may take a long time, it’s still great that the company has taken a solid step in the right direction with the decision to launch an accounting review.

That said, it’d still be important to watch how detailed the report is and how it is presented to the public as these will be key in assessing Noble’s determination to address the issues that were raised by its critics.

Foolish Summary

At their current price of S$0.725, Noble’s shares has made a nice 12% rebound from a recent low of S$0.645. But, it might still be a long way to go before investors can trust the company fully again. Hopefully, the accounting review can mark a positive turning point in the public’s perception of Noble’s transparency.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.