The NMC Health quagmire just got more complicated thanks to Czech activists

The crisis engulfing NMC Health took another twist on Wednesday after a Czech activist investor said it would not take a strategic stake in the FTSE 100 health-care operator unless it brought back founder and co-chairman Bavaguthu Raghuram Shetty, just days after the Indian billionaire quit the board.

Prague-based Krupa Global Investments (KGI), which is headed by chairman Pavol Krupa and owns one million shares in NMC NMC, +1.73%, said the current situation was “not in line with its strategy to take a significant stake,” but said it was ready to “renew negotiations of acquiring [a] strategic stake” if Shetty and the prominent Emirati Butti family return to top management.

It added: “Mr. B.R. Shetty and [the] Butti family built the NMC Health company on the basis of their good know-how and their good relationships in [the] Middle East, so KGI considers these recent top management representatives’ resignations as unacceptable and this move is not correct in our opinion.”

KGI said earlier in February that it had held talks with a “strong private-equity group” about taking a strategic stake in NMC or “securing financing” for Shetty, but didn’t name the buyout firm.

Shares in NMC, the worst performer in the FTSE 100 index so far this year, fell 4.5% on Wednesday at 10:10 a.m. GMT in London. NMC is the largest health-care provider in the Middle East.

Shetty stepped down on Monday as co-chairman of NMC after the company said he had misreported the size of his shareholding. Last week, the company revealed that Shetty’s stake and those of his two Emirati partners — Saeed Bin Butti Al Qebaisi and Khalifa Bin Butti Al Muhairi — had also been “incorrectly reported.”

U.K. regulators have started an investigation into the size of their shareholdings.

On Tuesday, NMC said its board “remains disappointed” in the disclosures made by Shetty and pressed his advisers to “ascertain the correct legal position in relation to his ownership of Ordinary Shares without further delay.”

NMC has been in crisis since December 2019 when U.S. short seller Muddy Waters, run by Carson Block, launched a 34- page report raising “serious doubts” about the group’s finances. NMC denied the allegations and has recruited former Federal Bureau of Investigation director Louis Freeh to carry out an independent investigation.

Responding to KGI’s statement on Wednesday, Block said: “Clearly the resignations ruined their [Krupa’s] desperate strategy of trying to push the stock higher by press release. In any event, it would only have been a ‘strategic stake’ if they had something to offer the company. They don’t.”

KGI kicked off a Twitter quarrel with Muddy Waters when the Czech activist said it was preparing to lodge a complaint with the U.K.’s Financial Conduct Authority and the FBI in the U.S. against Muddy Waters.

Krupa had alleged that Muddy Waters was publishing “misleading and manipulative information” on companies like NMC Health and Burford Capital.

Muddy Waters, which is headed by Carson Block, hit back at Krupa’s allegations in a tweet, saying: “Muddy Waters Capital LLC wishes to respond formally to accusations publicly leveled against it today — by a fund nobody has ever heard of.”

The tweet added: “Stupid is as stupid does.”

On Wednesday, Krupa said that in a few days it would “present outcomes of our meeting with NMC and our strategy going forward in open letter to all shareholders.”

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