Noble Hit Iceberg! Sell It!

Noble Group hits the Iceberg. Today, share prices of Noble Group dropped by 9%, in light of a report by Iceberg Group that Noble is the next Iceberg.

We should have read the signs - actually, I think I did, but who will ask others to sell stocks they do not hold?

I do not understand the world of commodities, and I never will. I do not know the people behind Iceberg Research, who claimed Noble is the next Enron. But I know a few pieces of evidence why Iceberg may be right:

(1) Management-auditor conflict. 'Ernst and Young retire' in Page 76 of their 2013 Company Report. Unless forced by regulators, there is no good reason why a reputable company like EY would not continue do auditing for a listed company.

(2) Higher-than-optimal financing costs. They are at US$400 million, which is almost 1.6 times more than the stated profit of US$238 million. When financing costs are much more than profit, they are really sensitive to various market factors, from the drop in prices of commodities to a rise of interest rates. Both already happen because of the end of quantitative easing and the increase of production by OPEC lately.

(3) Loss of control of Noble in its associates, due to the Difference in scale of the main company and its associates and Joint Ventures (JVs). If Noble's associates have larger losses (associates lose US$107 million) than the main company (with a loss of US$66 million), then I do not know whether Noble really has control over the associates.

Regardless of who is making such statements that Noble is the next Enron, even if s/he may not be credible as we do not know the people behind Iceberg Research, the facts above from its previous company report show that Noble is indeed in deep trouble.