Michael Dee: Time For The Noble Group Executive Chairman To Resign
Corporate Digest | 11 June 2015* *
This post is written by Michael Dee, which expresses his own views and thoughts on the subject matter. Michael has been in the investment banking scene (ex Morgan Stanley CEO SE Asia, ex Senior MD of Temasek Holdings) for more than 30 years.
Following an interview I gave on April 27th and the article titled An Open Memo to Noble Group’s 15,000 Employees published by Shares Investment on May 29th Noble’s share price has declined 25%.
This follows three reports issued by Iceberg Research questioning the veracity of Noble’s financial statements and accounting practices.
Iceberg, according to Noble, is a former employee in the credit department, which seems to perfectly position this person to have high quality insight into the true nature of Noble’s finances.
Yet it is the quality of the analysis, not who did it which is striking. I have done my own analysis and have similar questions.
Having watched Noble’s responses closely since Iceberg issued their first report I have found them seriously lacking in substance.
Instead of calmly answering all questions fully without exception they have run a playbook dependent on PR flaks, misdirection, dissembling, intimidation and lawsuits.
The dramatic decline in the share price on heavy volume make it clear this is not working and only the truth will suffice.
My views have been intended to prompt a change in Noble’s strategy and transparency. It has not worked. Hence my reaching out to those employees’
who have a career to consider along with a paycheck, benefits, health care pensions and more.
Employees have families, children and parents to support, and they must take this seriously.
We all remember the videos of 20 year Lehman employees who on a Friday were multi-millionaires and who on Monday lost all financial security and carried out their career in a cardboard box.
I have no interest in seeing Noble go bust which harms so many and I have no personal interest in the outcome in any way whatsoever.
However, it is time to realize the Noble’s founder, Mr Elman, their board, and their auditor have no intention to answer these questions hanging over Noble’s viability.
As such I have reluctantly reached the conclusion that Mr Elman must resign all official capacities with Noble, a new outside Executive Chairman installed, the board completely restructured, the auditors (E&Y) fired, and all the PR firms released. The current CEO and CFO should be given a short period of time to fully answer all questions fully or be fired as well.
While this may seem disruptive, remember that in the last five years the Dow is up about 80%, the STI is up about 20% yet Noble has dramatically declined about 60% and continues to fall on heavy volume.
Disruption is now needed to right the ship. This disturbing, well established trend makes it clear Mr Elman has lost credibility with investors and there is a rush to the exits.
As a 20% shareholder and founder of the company he exerts a huge gravitational force on his board, his senior management and his auditors.
This clearly must stop and the only way to do this is for him to fully and completely disassociate himself with the company.
Recently, Mr Elman and Noble have promoted that he is supporting the company with personal purchases along with those of two large shareholders, Prudential and Invesco.
However a review of the purchases done by the Business Times of Singapore show they are nothing more than window dressing.
These three shareholders account for a full one-third (33%) of the outstanding shares. However, their recent purchases only reflect 0.4% of total shares outstanding, a minuscule amount one can only interpret is meant to give the impression of support.
And let’s also not forget these purchases have taken place at prices as low as $0.76 and up to over $1.00 and the stock is now at $0.65.
These purchases mean nothing to the market. CIC, China’s sovereign wealth fund, at one point was Noble’s largest shareholder, yet they sold one-third of their holdings last year and have not been seen buying despite the collapse in the share price.
They have ‘gone dark’, are not commenting and certainly do not see value as they are not buying.
We are seeing real selling on high volumes. This is much more than shorts coming in, these are investors taking big losses to avoid losing it all.
One can never know all the motivations of each investor, yet it is crystal clear no one sees real value at these levels and certainly not the large owners.
At some point large holders will turn on the board of Noble and Mr Elman in particular. We have just seen it with Peter Sands at Standard Chartered for example and Aubrey McClendon at Chesapeake. At this stage it is the only option.
My greatest fear however is with the banks. I believe they know that what Noble calls “inventory sales” are really repos which are debt, yet not classified as such. If true, then liabilities are understated.
YanCoal and other MTM situations are alleged to overstate assets.
Understated liabilities, overstated assets, negative cash flow, increasing debt and a rapidly falling share price at some point will make the banks realize they are overextended.
And when this happens the risk is that they all rush for the exits together and cut off short term lending. At that point it’s all over but selecting the gravestone.
Short term debt from banks are the oxygen for these companies.
As the world watched Lehman fail in a matter of days with long term employees wiped out with a 20 year career in a cardboard box it was demonstrated that trading companies are indeed fragile entities.
As such it would be best for all if Mr Elman stepped down of his own accord before it is too late.
His ego and pride should not be allowed to jeopardize the careers and livelihood of thousands.
He’s a billionaire with a responsibility for thousands of employees and shareholders. Prudential, Invesco, CIC and others have seen the value of their holding plummet and their investors should be very unhappy.
All these forces should unite all, for nothing else, but the future of the company. With the stock now at $0.65 and falling fast. This chart tells all you need to know about how bad this situation is.
So Mr Elman, do the right thing, step down to save your legacy.
Corporate Digest | 11 June 2015* *
This post is written by Michael Dee, which expresses his own views and thoughts on the subject matter. Michael has been in the investment banking scene (ex Morgan Stanley CEO SE Asia, ex Senior MD of Temasek Holdings) for more than 30 years.
Following an interview I gave on April 27th and the article titled An Open Memo to Noble Group’s 15,000 Employees published by Shares Investment on May 29th Noble’s share price has declined 25%.
This follows three reports issued by Iceberg Research questioning the veracity of Noble’s financial statements and accounting practices.
Iceberg, according to Noble, is a former employee in the credit department, which seems to perfectly position this person to have high quality insight into the true nature of Noble’s finances.
Yet it is the quality of the analysis, not who did it which is striking. I have done my own analysis and have similar questions.
Having watched Noble’s responses closely since Iceberg issued their first report I have found them seriously lacking in substance.
Instead of calmly answering all questions fully without exception they have run a playbook dependent on PR flaks, misdirection, dissembling, intimidation and lawsuits.
The dramatic decline in the share price on heavy volume make it clear this is not working and only the truth will suffice.
My views have been intended to prompt a change in Noble’s strategy and transparency. It has not worked. Hence my reaching out to those employees’
who have a career to consider along with a paycheck, benefits, health care pensions and more.
Employees have families, children and parents to support, and they must take this seriously.
We all remember the videos of 20 year Lehman employees who on a Friday were multi-millionaires and who on Monday lost all financial security and carried out their career in a cardboard box.
I have no interest in seeing Noble go bust which harms so many and I have no personal interest in the outcome in any way whatsoever.
However, it is time to realize the Noble’s founder, Mr Elman, their board, and their auditor have no intention to answer these questions hanging over Noble’s viability.
As such I have reluctantly reached the conclusion that Mr Elman must resign all official capacities with Noble, a new outside Executive Chairman installed, the board completely restructured, the auditors (E&Y) fired, and all the PR firms released. The current CEO and CFO should be given a short period of time to fully answer all questions fully or be fired as well.
While this may seem disruptive, remember that in the last five years the Dow is up about 80%, the STI is up about 20% yet Noble has dramatically declined about 60% and continues to fall on heavy volume.
Disruption is now needed to right the ship. This disturbing, well established trend makes it clear Mr Elman has lost credibility with investors and there is a rush to the exits.
As a 20% shareholder and founder of the company he exerts a huge gravitational force on his board, his senior management and his auditors.
This clearly must stop and the only way to do this is for him to fully and completely disassociate himself with the company.
Recently, Mr Elman and Noble have promoted that he is supporting the company with personal purchases along with those of two large shareholders, Prudential and Invesco.
However a review of the purchases done by the Business Times of Singapore show they are nothing more than window dressing.
These three shareholders account for a full one-third (33%) of the outstanding shares. However, their recent purchases only reflect 0.4% of total shares outstanding, a minuscule amount one can only interpret is meant to give the impression of support.
And let’s also not forget these purchases have taken place at prices as low as $0.76 and up to over $1.00 and the stock is now at $0.65.
These purchases mean nothing to the market. CIC, China’s sovereign wealth fund, at one point was Noble’s largest shareholder, yet they sold one-third of their holdings last year and have not been seen buying despite the collapse in the share price.
They have ‘gone dark’, are not commenting and certainly do not see value as they are not buying.
We are seeing real selling on high volumes. This is much more than shorts coming in, these are investors taking big losses to avoid losing it all.
One can never know all the motivations of each investor, yet it is crystal clear no one sees real value at these levels and certainly not the large owners.
At some point large holders will turn on the board of Noble and Mr Elman in particular. We have just seen it with Peter Sands at Standard Chartered for example and Aubrey McClendon at Chesapeake. At this stage it is the only option.
My greatest fear however is with the banks. I believe they know that what Noble calls “inventory sales” are really repos which are debt, yet not classified as such. If true, then liabilities are understated.
YanCoal and other MTM situations are alleged to overstate assets.
Understated liabilities, overstated assets, negative cash flow, increasing debt and a rapidly falling share price at some point will make the banks realize they are overextended.
And when this happens the risk is that they all rush for the exits together and cut off short term lending. At that point it’s all over but selecting the gravestone.
Short term debt from banks are the oxygen for these companies.
As the world watched Lehman fail in a matter of days with long term employees wiped out with a 20 year career in a cardboard box it was demonstrated that trading companies are indeed fragile entities.
As such it would be best for all if Mr Elman stepped down of his own accord before it is too late.
His ego and pride should not be allowed to jeopardize the careers and livelihood of thousands.
He’s a billionaire with a responsibility for thousands of employees and shareholders. Prudential, Invesco, CIC and others have seen the value of their holding plummet and their investors should be very unhappy.
All these forces should unite all, for nothing else, but the future of the company. With the stock now at $0.65 and falling fast. This chart tells all you need to know about how bad this situation is.
So Mr Elman, do the right thing, step down to save your legacy.
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