{ "docId": "019dd923-622c-750b-8b96-5115bded0db8", "docSlug": "562f89e5e11c", "documentTitle": "Noble Group (NOBL)", "authorId": "51_Muddy_Waters", "authorName": "Carson C. Block", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2015-04-09 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 9, "pageCount": 14, "prevPage": 8, "nextPage": 10, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 5, "notes": "This is a text-heavy research note page detailing allegations of sham transactions and lack of transparency.", "elementsJson": [ "paragraph", "footnote" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b96-5115bded0db8/9", "deckHref": "/decks/019dd923-622c-750b-8b96-5115bded0db8", "deckJsonHref": "/decks/019dd923-622c-750b-8b96-5115bded0db8.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b96-5115bded0db8#slide-9", "components": [ { "bbox": null, "kind": "callout", "text": "PT ALH seems to be a premeditated chain of sham transactions that not only unjustifiably pumped up net income by $46.4 million (and possibly EBITDA the next year), but requires investors to believe that in order to facilitate the transactions, Noble’s attorneys went out of pocket $12 million.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-0930-77dc-94a1-f001cb048285", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.11, "w": 0.72, "x": 0.14, "y": 0.38 }, "kind": "paragraph", "text": "We cannot understand the justification for a VIE-type of structure in this instance. Noble seems to have had no legal problem owning 100% of PT BSM previously. We suspect that imposing this layer that Noble does not actually own somehow serves to further the chain of likely sham transactions. This is particularly true, given that Noble claims $28 million changed hands. To whom did the $28 million go, if to anybody at all?", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "128af25f-229d-4f15-bf33-aa9042222093", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.16, "w": 0.72, "x": 0.14, "y": 0.21 }, "kind": "paragraph", "text": "While PT Jatro did eventually receive 55% of PT BSM, the remaining 45% is still owned by PT ARS. However, the shareholders of PT ARS have not changed – they are still Ms. Tumondo and Ms. Rayahoe's son. At the time of Noble's January 20, 2014 announcement, Noble referred to PT BSM as its “ultimately beneficially wholly-owned and controlled subsidiary”, which implies that Noble could have had a “variable interest entity”-type structure in place with PT ARS. (“VIE” structures seek to transfer economic benefit and control to parties other than the actual equity owners.)", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4f6373e9-72c7-476f-b6ed-a0cc6707dce2", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.72, "x": 0.14, "y": 0.72 }, "kind": "paragraph", "text": "Noble responded to criticism of its fair value practices and calls for transparency into them by stating it has over 12,000 agreements, which it marks to market using conservative assumptions. The implication of this statement is that the average net fair value gain per contract in its portfolio is small, and Noble's accounting is thus reasonable. However, PT ALH shows us that one contract can significantly move the needle. Management has therefore failed to adequately respond to the criticism, which we strongly suspect is because transparency could negatively impact Noble's credit rating.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "5651487e-1dd6-43d9-9eea-670f3b82eba7", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.72, "x": 0.14, "y": 0.09 }, "kind": "paragraph", "text": "Moreover, Hetty Tumondo owns 50 shares of PT ARS (90.1%), and Ms. Rayahoe's son owns 9.09%. This shareholding structure is identical in every respect to that of PT Dayana. Because PT Dayana seems to have been conceived for purposes of being a straw party, it is reasonable to conclude that PT ARS and the disposal of PT BSM were part of the same plan.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9c9b6410-f5be-4e26-8a17-c6ed34bce50b", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.72, "x": 0.14, "y": 0.53 }, "kind": "paragraph", "text": "PT ALH shows that Noble management manipulates financials and investors when the pressure is on. The problem for investors is that given how prodigiously Noble chews up cash, the pressure is always on. PT ALH seems to be a premeditated chain of sham transactions that not only unjustifiably pumped up net income by $46.4 million (and possibly EBITDA the next year), but requires investors to believe that in order to facilitate the transactions, Noble's attorneys went out of pocket $12 million. And of course there is the question of whether Noble really owns a share of PT BSM, and did anybody receive the $28 million purportedly paid for the majority share?", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "dc7c69ae-5a69-4b09-a74c-fa3979d7b5a3", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.45, "x": 0.14, "y": 0.89 }, "kind": "source-note", "text": "31 Until October 2012, Ms. Tumondo's shares were owned by Ms. Rayahoe.", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "6117b1a6-6dbe-4bd9-b02a-59336eb4ee5f", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.1, "x": 0.14, "y": 0.49 }, "kind": "title", "text": "Conclusion", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4cd86a28-a2cb-499e-ba95-4a80fa164085", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "8646b87e-3e75-4a6c-a0a7-04231bdfe7a9", "evidence": "The text explicitly argues that the company is using sham transactions and VIE structures to manipulate financials.", "confidence": 0.9 } ], "arcBeats": [ { "to": 10, "from": 6, "beatId": "0ae25f44-6e73-4c25-ba85-72ade228048e", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "The Struggle", "beatSlug": "overcoming-monster-the-struggle", "evidence": "The document presents an analysis of Noble Group's transactions and accounting practices, highlighting contradictions and discrepancies.", "position": 1, "confidence": 0.8, "parentBeatName": "Development", "parentBeatSlug": "development" } ], "loops": [ { "to": 9, "from": 3, "name": "The Reveal", "slug": "05-the-reveal", "bestFor": "Product launches, strategic pivots, unexpected findings", "matchId": "661626c9-23dd-44b7-9cae-b354b6185fc5", "evidence": "The document presents a series of contradictions and discrepancies in Noble Group's accounting practices.", "position": 0, "objective": "To reveal the truth about Noble Group's accounting practices", "structure": "Setup the Question -> Build Suspense -> The Big Reveal", "confidence": 0.7, "description": "Build mystery and anticipation, then deliver a surprising or powerful conclusion" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }