Olam Group’s stock dips for a month following director’s bond controversy and Nigerian probe

SINGAPORE: The Olam Group, a major agri-business firm, is grappling with a significant financial downturn, highlighted by a sharp decline in stock prices over the recent period. This distress was set off by revelations that its Nigerian subsidiary secured a considerable bond for director Prakash Kanth, creating a wave of market unease.

The stock price took a nosedive from S$1.28 on 8 September to just S$0.85 as of 25 October, marking a 33% reduction. This issue became more pronounced against the backdrop of a six-month decline from S$1.58 on 26 April, translating to a near 46% decrease, underscoring the gravity of the financial crisis besieging the firm.

On Wednesday (25 Oct), the situation seemed far from stabilizing, with stock values oscillating throughout the day. The trading commenced at S$0.89, dropped to a worrying S$0.82 by 10 am, and saw a slight rebound to S$0.84 by 11 am. The stock’s value wavered for the remainder of the day, eventually settling at S$0.85 at close.

The financial strain on Olam is happening despite its solid corporate backing. In May 2014, when Olam was valued at US$4.3 billion, Temasek, as the majority shareholder, made an offer to acquire the remaining shares from minority shareholders, raising the share price to S$2.23. As it stands, Temasek controls 1,963,148,732 shares via Breedens Investments and Aranda Investments, equating to a dominant 51.4% of Olam’s total issued share capital.

However, even with Temasek’s substantial involvement, Olam faces significant challenges, underscored by its lowest share price point since re-listing on the Singapore Exchange as the Olam Group on 16 March 2022, post-restructuring.

The pressure mounted with a startling report on 11 Sept by the Daily Nigerian, disclosing Olam Nigeria’s move to post a one billion nairas (SG$1.9 million) bail bond, securing Kanth’s release from State Security Service (SSS) remand.

This development coincided with serious legal implications and a high-profile scandal, as other executives reportedly left Nigeria following the arrest of the Central Bank of Nigeria’s governor, Godwin Emefiele.

Documents tied to the case show that Micro Feed Nigeria Limited, part of Olam’s operations, intervened financially amidst allegations of money laundering involving Kanth.

Amidst these controversies, the SSS has demanded an extensive review of Olam’s transactions dating back to 2015, including exhaustive financial documentation, details on foreign exchange activities, and comprehensive information on the firm’s expatriate quota and executive staff within Nigeria.

While Olam countered the allegations with a public statement on 11 September, insiders within security and foreign exchange sectors suggest that the company’s explanations might not fully dispel the concerns, indicating a potentially extended period of scrutiny and market instability for the agri-giant.