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Michael Dee: Response To Noble’s Open Letter
Corporate Digest | 17 June 2015

This post is republished from a letter written by Michael Dee addressed to Noble Group’s open letter filed on the SGX. 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.

While I now seem to have Noble’s attention, it is to their long suffering shareholders and employees I hope they pay attention to.

I only am interested in the facts and am willing to change my opinion based on real facts and not a letter drafted by Noble’s PR team. I write every word myself. I do my own analysis. My views are mine and mine alone.

If I am presented information that changes my views I will be the first to change. Nothing in Noble’s letter rises to the level needed to erase my concerns.

Noble have had two months to respond to me, yet I am responding in one hour to their letter. I am trying to highlight questions which are legitimate and which predate Iceberg Research.

Mr Alireza, convince me you are right because not only I but the market overall is not convinced with your presentation to date. I don’t have a PR firm on retainer like a trained pit bull. My immediate response is as follows:

“Mr Alireza, you say Yancoal is an Associate company yet you only own 13 percent, not the required 20 percent. How is that consistent with accounting standards and market practice?

If you are so confident of your Yancoal book value release the full model, with all it’s assumptions, both before and after you recently wrote it down 40 percent.

Let the market decide if your assumptions that it is worth 30 to 50 times the market value are realistic and if Yancoal is worth what you say.

You ask us to believe all your mark-to-market valuations yet you will not show us your work. Release the full model, I dare you!”

“As for Mr Elman, I congratulate him for building a company from nothing and becoming a billionaire in the process.

It is a fantastic story. In fact I hosted him at my home when the Prime Minister of Mongolia and members of his cabinet accepted my invitation to dinner in Singapore.

This was a sign of my respect at the time. However, over the last five years $1 invested in the Dow is now worth four times that of the same $1 invested in Noble.

The company is in decline, it’s credibility in tatters, it’s stock down 40 percent in months. This is under his leadership. He is 75 and 80 percent of the company is owned by others not named Elman.

It is time to move on and get a new Chairman and Auditor. He has my respect for what he built, but not for how he has run it for the last five years.”

“While we are at it, how much stock have you bought personally Mr Alireza? I haven’t seen your filings on the SGX website.

I haven’t seen you stepping up to the plate with your wallet. You get your enormous share position given to you from the shareholders.

Show us your confidence in Noble and start buying with your personal funds. Do it until it hurts. Put your skin in the game. Until you do your letter is just empty words. Show us your money!”

“As for those other shareholders buying your stock you tout? According to public SGX filings Invesco on June 2nd bought 1.8 million share and on June 3rd they sold over 12 million! One day later they sold ten times what they bought a day earlier.

And all your banks showing confidence? Well, Bloomberg is reporting that ANZ is selling down the syndicated loan you so proudly promote. You say that is normal practice.

Really? After only a few weeks? With 30 years of history in the capital markets let me inform you this is not standard practice.

And Goldman Sachs, your former firm, just downgraded Noble to a hold with a target price of $0.77 from a buy with a target price of $1.30. This is a 40% decline. Does any of this show Confidence? Sure doesn’t look that way to me.”

As for your inventory sales I have asked a simple question you have not answered. “How many ‘inventory sales’ have you done in the past three years and how many times have you not repurchased them?”.

My working hypothesis is that virtually everytime you have repurchased them. This in substance they are no different from a repurchase obligation which is a liability.

Just because your over 20 year auditor says it’s not a repo does not mean that in substance it’s not a repo.

If it looks like a duck, quacks like a duck and floats like a duck, it’s not a turkey. You hide behind technical definitions when the substance is not addressed.

If you can prove that at least 50 percent of the time you do not repurchase these inventories I will retract my statement. Prove me wrong. Over to you Mr Alireza.”

“As for Iceberg, stop your silly lawsuit against him. You are a multi-billion dollar company and you are suing a guy for saying what you can’t disprove with facts, and what the market now believes.

It is striking that a bottom 10 percent performer in the freight department has now got the attention of the global financial markets. Perhaps you underestimated his abilities.

The highly respected Carey Wong at OCBC just lowered their fair value to $0.61 and he was at $1.05 just a few months ago. Goldman Sachs is now a hold from a buy.

You can’t intimidate the market or the media with your bluster and your hired PR flacks. You’re acting like a bully. Grow up and just answer the questions fully and professionally.

I for one will continue to express my professional opinion based on 30 years of experience in the investment banking field. I take no sides but listen to all sides to form an opinion.

Mr Elman said “our silence has, in fact, not been silence”. While I have no idea what that really means is would say “your silence has been deafening”.

Having said that I will change my view when, and only when, you prove your assertions to the market.”

“I am easy to find. If you wanted to reach me you could have. Yesterday I committed to a well placed banker for Noble that I was willing to talk.

My phone didn’t ring. When I challenged Olam the CEO was the first to call at 530am he earned my respect for that.

This is not about me because I have no stake in this at all. It is about those shareholders and employees who have no voice and yet who want answers.

The only answer you’ve given is a denial with no detail. It’s about time you really speak to shareholders, debt holders and employees, and explain your position.

So far the short position has gone from 0.2 percent to about 8 percent in just a few months according to media reports.

You have been the buyer of 63 million shares yet Jefferies says that there are 400 million shares that are short.

You have returned the price to that of a week ago. Only the truth and facts and details will suffice at this stage. Your best defense is not wasting the shareholders cash on futile buy backs but rather explaining your position. That you haven’t been able to achieve this convincingly for the last four months tells us all we need to know.”

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