Research Firm Likens Olam to Enron

US research firm Muddy Waters has criticized Singapore-based farm commodities giant Olam International, comparing it to failed energy trader Enron Corp. The company reported a turnover of Sg$15.73 billion ($12.30 billion) in its last financial year ending June 30, and shares closed 6.0% lower after the report was released. Olam rejected the allegations made by Muddy Waters about its financial health and accounting practices, stating that its value is less than its debt and it is at significant risk of defaulting on its obligations.

Muddy Waters likened Olam to Enron, alleging they used similar accounting techniques to value gains. Both companies appear to have tried to scale their trading businesses too far and too fast, resulting in substantial cash burns. Olam said it had read the report and found “no substance in their broad allegations” and that its accounting practices are fully compliant with global standards.

Olam sued Muddy Waters and its founder Carson Block at the Singapore High Court, citing “slander, libel and/or malicious falsehood”. Olam sources 44 products from 65 countries and supplies them to more than 11,600 customers. Singapore’s state investment firm Temasek Holdings owns 16% of Olam’s shares.

Olam’s assessment of companies has been closely monitored, especially after Chinese timber supplier Sino-Forest Corp filed for bankruptcy protection following a 2011 Muddy Waters report questioning the value of its assets.

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