Marex has addressed accusations made by NINGI Research for a second time, with chief executive Ian Lowitt confirming in Wednesday’s Q2 earnings call that the firm “rebuts all of the allegations” levelled at Marex.
The Q2 earnings demonstrated a record performance for the firm, which included its highest ever Q2 for agency and execution, with revenue up 59% year-on-year. Marex also highlighted the positive effect of its acquisition of TD Cowen’s outsourced trading and prime brokerage business in 2023, and the future opportunities set to be unlocked by the more recent acquisition of Winterflood Securities.
Despite this, the industry has been keen to hear from Marex following the bombshell report from NINGI Research, released 8 August, which labelled the organisation “a financial house of cards”.
NINGI Research currently has a short position in the business, which has prompted a to and fro between the businesses as to the motivations behind the accusations levelled by NINGI.
In the report, NINGI claimed: “We are short Marex Group, because, in our opinion, Marex has engaged in a multi-year accounting scheme involving a web of opaque off-balance-sheet entities, fictitious intercompany transactions, and misleading disclosures to conceal significant losses, inflate profits, and mask its true risk exposure.
“We have uncovered evidence suggesting Marex is a financial house of cards, with a balance sheet riddled with holes and financials that we believe are unreliable.”
Specifically, NINGI’s report includes claims that: “Marex bailed out a failed volatility fund (VPF) to conceal an estimated $27 million loss” and that “Deloitte resigned from its legally mandated role at this entity, leaving the fund unaudited. The report adds that “Marex’s SEC prospectus reports debt levels of both $2.1bn and $2.6bn for the same period,” that there were “implausible profits from market making,” and “aggressive insider and backer selling,” among other things.
In response, on 5 August, Marex issued a statement “rejecting” the “malicious” report.
The business branded the move from NINGI “a transparent effort to manipulate the share price to enable NINGI to profit from the short position it previously built”.
“The report contains factual inaccuracies, misstatements, and misleading allegations,” continued the firm.
“Marex is committed to the highest standards of integrity, managing its business in accordance with regulatory requirements in every jurisdiction where it operates. Marex reports its financial figures in accordance with international reporting standards (IFRS) and adheres to the highest standards of corporate governance.”
Further, Marex has made clear that the NINGI report was published without any involvement from themselves.
Notably, Marex labelled NINGI a short-selling fund, whilst NINGI refers to itself as a company focused on investigative reporting on public companies.
Since Marex’s initial statement, NINGI Research has doubled down on its accusations, labelling comments “a boiler plate response” and highlighting that they await Marex’s Q2 earning report, advising those tuned in to focused not on whether Marex beats expectations, but exactly how.
Speaking in the earnings call on 13 August, Lowitt addressed several of the key accusations directly. This included reference to the Luxembourg entities, explaining that “it is simply untrue that the two entities cited in the report are off balance sheet. There are no off balance sheet entities at Marex and all of our activity is consolidated in our reporting and in our public financials.”
Among other things, Lowitt also asserted that comments around lack of auditing were unfounded, stating that “part of the benefit of being a public company is the number of eyes on the firm”.
Read more: Marex to acquire Winterflood Securities from Close Brothers in £100 million deal
Addressing the accusations in the earnings call, Lowitt confirmed that the business had reviewed the short-sell report on a point-by-point basis with “very seasoned financial professionals” with the audit committee ultimately “completely comfortable” with Marex’s rebuttal.
“Part of being a public company is investors can short your stock and indeed people can publish reports about your firm with no requirement to be accurate. As unpleasant as it is to be the focus of a short report, I accept that it is a part of the way the market operate. It is part of the ecosystem which ensures markets function well,” said Lowitt.
He further added “I’d like to thank our investors, our debt holders and our clients who have engaged with us over the past week. You all completely understandably took the allegation seriously. But were open to hear our response and listen with an open mind.”
NINGI Research has yet to respond to Marex’s earnings or latest comments.