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Muddy Waters shorts Fairfax following alleged asset manipulation

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Short seller Muddy Waters Capital has placed bets against the shares of Canadian insurance company Fairfax Financial Holdings after releasing a report alleging that the company has consistently manipulated asset values.

Fairfax Financial’s shares slumped 12% on Thursday on the back of the report after Muddy Waters claimed the company had engaged in value destructive transactions aimed at generating accounting gains.

According to Muddy Waters’ report, Fairfax’s book value should be around $4.6bn, approximately 18% lower than reported.

Writing in the report, Muddy Waters said: “Muddy Waters is [sic] short Fairfax Financial Holdings Limited because we find that Fairfax has consistently manipulated asset values and income by engaging in often value destructive transactions to produce accounting gains. We believe a conservative adjustment to book value should be ~$4.5bn or ~18% lower than reported. We see Fairfax as far more akin to GE than to Berkshire Hathaway.”

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