Fairfax Financial Denies Allegations of Manipulating Asset Values
Fairfax Financial, a Canadian insurer, has dismissed claims made by Muddy Waters Research that it manipulated asset values. The company strongly refuted the accusations, stating that Muddy Waters’ report was “false and misleading”. This detailed response came after Fairfax’s initial brief reaction to the report, in which Muddy Waters accused the insurer of engaging in “value destructive transactions” to generate accounting gains.
In its defense, Fairfax pointed out that Muddy Waters had not contacted them directly or provided a written statement. Instead, the report was released during Fairfax’s quiet period, with what the insurer described as “one-sided, ill-informed allegations and insinuations in a transparent attempt to profit by short selling our stock”.
Fairfax confidently asserted that Muddy Waters had underestimated the company’s financial strength and future prospects, and anticipated that the marketplace would reflect these strong fundamentals.
Muddy Waters, anticipating a more detailed response from Fairfax, expressed its desire for a substantive reply that specifically addressed its findings. Fairfax, founded in 1985 by Canadian-Indian billionaire Prem Watsa, operates in property and casualty insurance and reinsurance through its subsidiaries.
Part of Muddy Waters’ criticism was that Fairfax resembled General Electric (GE) more than Berkshire Hathaway. Countering this claim, Watsa stated, “We are neither Berkshire Hathaway, nor GE, as Muddy Waters suggests. We are Fairfax, a strong and enduring company built over 38 years.”
Analyst comment
Neutral news. Fairfax Financial denies allegations of manipulating asset values made by Muddy Waters Research. Fairfax strongly refutes the accusations and asserts that Muddy Waters has underestimated the company’s financial strength and future prospects. The market is likely to react cautiously until more information is provided by both parties.
