Olam is down 0.6% at $1.69 after the company initiated legal action in Singapore against short-seller Carson Block and his research firm Muddy Waters LLC for alleged “libel and slander” for statements which caused its stock to plunge earlier this week.
Muddy Waters’ PR firm said Block and his firm are “always ready to defend our views vigorously.” Carey Wong, an analyst at OCBC, says “the lawsuit may be a mixed bag for them. While it’s good Olam is taking the approach to defend itself, the other side of the coin is that lawsuits like this are particularly expensive, long-drawn and in a worst-case scenario, could divert management.”
He adds, a win in court probably isn’t enforceable as Muddy Waters isn’t in Singapore. He believes the market may view the lawsuit as having a limited impact; “if anything, over a long period, this could be a drain.”
Orderbook quotes suggest the stock is unlikely to retest its intraday low at $1.665.