Oct 15 Sweden’s TeliaSonera has rejected what it called “serious criticism” from U.S.-based investment research firm Muddy Waters over the openness of its financial disclosures, saying its statements were in line with international standards.
Muddy Waters, which specialises in short-selling selected stocks in the expectation they will decline in value, published its views on TeliaSonera on Thursday, sending shares in the telecoms group sharply lower.
But TeliaSonera said it did not recognise Muddy Waters’ conclusions regarding its operations in a number of emerging markets and the risk of legal action over alleged corrupt payments.
It said it was not in a position to make any provisions for possible legal action, given it had not received any claims against which it could make any such provisions.
“It is only if and when any claims materialise that it is possible to make any provisions in the financial statements,” the company said.
TeliaSonera said last month it would gradually abandon its operations in central Asian markets, hit by years of investigations into alleged corruption linked to local partners and problems accessing cash in distant countries.
Its CEO Johan Dennelind said work done to improve corporate governance in Nepal, Kazakhstan, Uzbekistan, Azerbaijan, Georgia, Moldova and Tajikistan made it possible to sell these businesses, though in Uzbekistan and Azerbaijan, it still did not know the identity of the ultimate owners of its local partner companies.
TeliaSonera shares fell as much as 8 percent after Muddy Waters published what it said was an open letter to TeliaSonera’s board, in which it said it had taken a short position in the company’s securities.
“It is a strong reaction (by the shares) on limited new information. We believe it is a probably an over-reaction,” Swedbank Markets analyst Stefan Ward said. “It is important to note that this piece of news comes from a party with its own interest in the message.”
The shares recovered some of their decline after the company’s statement and closed down 3 percent at 42.05 crowns.
In its letter, Muddy Waters said it believed information was being withheld from investors that, along with a lack of action in these matters by the board and management, would significantly impact the company’s shares and credit profile.
“While TeliaSonera has provided some transparency into its misdeeds in Uzbekistan, it has not made public the likelihood that the company’s other Eurasian and Nepal operations suffer from similar problems, and on a massive scale,” it wrote.
The short-seller also said TeliaSonera could have legal liability in the tens of billions of Swedish crowns, and that it had not made provisions for settlements or penalties.
The company said it had no further comment beyond what it said in its statement.
To read the letter click on: