In the early 2010s, as Olam Group expanded its business and enjoyed strong share price performance, it became embroiled in a conflict with US-based short seller Muddy Waters.
After research firm and brokerage Credit Lyonnais Securities Asia raised questions about Olam’s reporting discrepancies in 2011, Muddy Waters founder and CEO Carson Block published a 133-page report a year later. The report accused Olam of using accounting tricks to inflate profits and overspending on low-quality assets, among other allegations.
Olam countered Muddy Waters’ claims, alleging that the report aimed to create panic among its shareholders, bondholders and creditors. Olam believed the accusations were intended to benefit Block and associates through their short position in Olam securities.
As the battle continued and Olam struggled to restore investor confidence amid financing challenges, Temasek intervened in 2013 as a significant investor. By April of that year, Temasek had increased its stake in Olam from 16% to 24%, expressing confidence in Olam’s credit position and long-term prospects.
In 2014, Temasek became Olam’s majority shareholder through a voluntary general offer, owning 1.96 million shares via Breedens Investments and Aranda Investments, totalling 51.4% of the issued share capital. Temasek’s intervention significantly bolstered Olam’s credit profile in subsequent years.
A decade later, Olam encountered a new challenge: the spinoff and listing of its subsidiaries. In 2020, Olam announced a reorganisation plan to divide the entity into three new operating groups — Olam Food Ingredients (OFI), Olam Agri (formerly Olam Global Agri) and Olam International VC2 — through carve-outs, subsequent IPOs and a sequential demerger.
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OFI is the group’s value-added ingredients unit, while Olam Agri is its food, feed and fibre operating arm. Both IPOs have been significantly delayed from their slated original dates.
OFI was also scheduled to IPO on the London Stock Exchange in 2Q2022, alongside a secondary listing in Singapore. On the other hand, Olam Agri planned a primary listing on the Singapore Exchange S68 ’s mainboard in 1H2023, with a concurrent dual listing on Saudi Arabia’s Tadawul. As of now, neither IPO has materialised.
In a December 2022 interview with The Edge Singapore, OFI CEO A Shekhar said the company is waiting for stability in the market and fair valuation before it can proceed with its IPO plans, claiming that it is not facing any financial pressure to list. “We are well-prepared for an IPO at any point in time. For us, the capital market transaction is an important way to create a value channel, but we do not want to be desperate about it,” he added.
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Compared to OFI, Olam Agri’s IPO appears clearer. The move will mark the first dual listing for a company on the two specific stock exchanges as well as the debut listing of a non-Gulf Cooperation Council-incorporated business in Saudi Arabia.
At its 2HFY2023 ended December 2023 earnings call, Olam CEO Sunny Verghese explained that Olam Agri’s IPO will not happen in 1HFY2024 as the regulatory framework is still being finalised given the distinct nature of the transaction.
While the timing of both IPOs remains uncertain, Verghese reiterated the company’s commitment to pursuing both listings, emphasising they are “not in a rush”. Lastly, Table 2 reveals that Olam is the most and only overvalued listed stock in Temasek’s portfolio.
