Fairfax Financial Holdings Stock Falls Nearly 13% on Manipulation Allegations

Short seller Muddy Waters alleged manipulation in its asset values. We don’t disagree, but aren't changing our fair value estimate for FFH Stock.

Ruth Saldanha 8 February, 2024 | 2:29PM
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Earlier on Thursday, short seller Muddy Waters placed bets against the shares of Fairfax Financial holdings FFH, alleging manipulation in its asset values, which sent the stock plunging 12.8%.

In response, Fairfax issued a statement saying that it disagrees with the allegations and insinuations contained in the report. “(the company) Would like to assure all shareholders that Fairfax has prepared its financial statements and reporting in accordance with all applicable accounting principles,” it said.

Morningstar Analyst Does Not Disagree with Muddy Waters' Take on Fairfax Financial Holdings

Morningstar analyst Brett Horn said, of the Muddy Waters report outlining a bear case on no-moat Fairfax, “At a high level, we don’t disagree with its take, and we do think the stock is materially overvalued right now. In our opinion, Fairfax is a hit-and-miss investor, a relatively poor underwriter, and has an overly complicated structure. We would agree that the company’s book value growth target of 15% is unrealistic, and it has generally fallen well short of this level since the financial crisis. As to Muddy Waters' claims that Fairfax is mismarking investments, we don’t think it is necessary to believe that to think the stock is overvalued,” he said, adding that he is maintaining his $970 fair value estimate for the Fairfax Financial Holdings stock.

Fairfax is a holding company. Through its subsidiaries it is in property and casualty insurance, and reinsurance. It also has an investment management business.

The author or authors do not own shares in any securities mentioned in this article.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Fairfax Financial Holdings Ltd Shs Subord.Vtg1,521.05 CAD-0.36Rating

About Author

Ruth Saldanha

Ruth Saldanha  is Editorial Manager at Morningstar.ca. Follow her on Twitter @KarishmaRuth.


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