How a tiny, secretive research shop exposed one of the world’s biggest commodity traders

Look out.
Look out.
Image: Reuters/Bob Strong
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The CEO of Noble Group unexpectedly stepped down today (May 30), the latest bad news from a storied Hong Kong investment giant that is one of the world’s biggest commodity traders.

Yusuf Alireza, a former Goldman Sachs manager who took over the company in mid-2013, resigned unexpectedly “for family reasons,” the company said in a statement today to the Singapore Stock Exchange. A longer statement said instead that he has completed a “transformation process” at the company and “considered that the time was right for him to move on.”

Surprised investors didn’t agree—the company’s stock fell nearly 5% in Singapore trading today.

Commodity traders like Noble have suffered as prices of oil, coal, and other key commodities fell in recent years, and the industry has gone through a wrenching round of consolidation. Still, some big banks in the business have managed to wrestle decent profits from the volatility, and particularly as commodity prices bounced back in recent months.

Noble, though, has not recovered from a loss in investor confidence that started in February 2015:

That’s when Iceberg Research, a little-known, secretive firm that says it specializes in “revealing financial manipulation and accounting frauds,” started questioning the company’s accounts in a series of reports issued on its WordPress-run website. Noble Group is “a repeat of Enron,” the fraudulent energy trader, Iceberg alleged in its first report in February 2015, and is substantially overvaluing its assets. The company is also under-reporting its debt, it said in its third report, and over-valuing its contracts.

Iceberg sent the reports to equity analysts, who sent it to fund managers, who decided that the arguments were sound and started selling the stock.

Noble’s stock headed down fast, spooking lenders and credit analysts who started re-examining the company. Noble repeatedly disputed the reports and, in March of 2015, filed a lawsuit against the man the company says is behind Iceberg Research, Arnaud Vagner, a former employee who served as a credit analyst. In August, Noble circulated a lengthy report from PriceWaterhouse Coopers saying its accounting fit with international norms, and the company called a special shareholder meeting to answer questions.

But the loss of confidence in Noble’s accounting and operations continued—in recent months, Moody’s and then Standard & Poor’s downgraded the company’s rating to “junk” status, signaling that it was a very risky investment and driving up its cost of credit. In March of this year, it was removed from Singapore’s key stock index, erasing even more liquidity.

Iceberg, for its part, continues to publish reports, but remains relatively anonymous. The company’s website doesn’t list a phone number, information about its researchers, or a headquarters location—but it did welcome Alireza’s departure.

“We think the resignation is long overdue after the stock price collapsed by 76% since Mr. Alireza was appointed,” an Iceberg representative told Quartz in response to emailed questions. The company declined to provide information on its operations, except to say it was not a short-seller trying to drive the price down. “We have not made money with Noble,” the spokesman said. “It was a way to launch Iceberg and to expose a very large financial manipulation.”

The research firm’s year-long focus on Noble Group is just the beginning, the representative indicated. “We are known for our research in Noble but we are working on and will publish on other companies too,” the representative said by email. “In the future, we will have positions (long or short) on the companies we research or publish on.”

“You will hear of Iceberg in the future,” he said.

This article was updated after publication with more information about how Iceberg’s reports were distributed.