Olam International boss Sunny Verghese hit back at allegations by noted short-selling investor Muddy Waters, saying they may have been part of a "concerted and unfair" attempt to profit from share price falls.

Mr Verghese, who has driven the rise of the Singapore-based commodities trading group into a global concern, said that Muddy Waters' claims that Olam, which the fund termed a "black hole", were "baseless" and "without any evidence to substantiate them".

Olam was to investigate whether "there is anything illegal going on here", in terms of the accusations of Muddy Waters, which has a short position on Olam, and thus stands to gain from the share price falls.

Olam shares tumbled 21% in overnight deals in the US-over-the-counter market, with the main Singapore-listed stock, after a temporary trading halt, falling 11% at one point before recovering to close down 7.5% at Sing$1.61, wiping more than Sing$300m from the group's stockmarket value.

'Concerted and unfair attack'

"Short selling is not illegal. But manipulating a company's share price is certainly as we know illegal," he said, threatening legal action if foulplay was unearthed.

"If there is any illegal behaviour involved, we owe it to our shareholders to make sure they are compensated for that."

Olam was the most shorted company listed in Singapore, with shorting twice as heavy as the second group on the list, in the run up to the allegations made by Carson Block, the head of Muddy Waters, at a conference in London on Monday.

Costs of borrowing Olam shares, a pre-prerequisite of selling them short, had "gone very high", Mr Verghese said

"We see that pattern", sparking suspicions of a "concerted and unfair attack on the company".

'Not a black box – a black hole'

The comments follow criticisms by Mr Block over Olam's accounting practices, including the way the group booked profits on acquisitions and valued its agricultural assets such as crops, livestock and plantations.

"This is not a black box – this is a black hole," Mr Block told a conference in London, according to the Financial Times.

Muddy Waters, which has a report on Olam scheduled for release on Tuesday, has gained a fearsome reputation for unearthing misaccounting in some Chinese companies listed on Western exchanges.

Another agriculture group it targeted -China-based, but Toronto-listed, Sino-Forest Corporation - sought bankruptcy protection earlier this year.

However, not all its allegations have hit the mark.

Focus Media, a Chinese operator of electronic billboards, initially saw its stock tumble after being targeted by Muddy Waters, but regained credibility after its founder launched a bid backed by private equity giant Carlyle.

Big target

Olam, whose market value remains at some $3.2bn after Tuesday's share price fall, is larger than Muddy Water's historic target.

Mr Verghese said that Olam could fund its operations for 18 months if Muddy Waters' allegations led to it being shut out of debt markets.

He also said that, while Mr Block had criticised Olam's debt levels, they had the support of banks and long-term shareholders, who "understand" the rationale for borrowings which might at first sight appear high.