There has been a rash of resignations from the board of under-fire NMC Health PLC (LON:NMC), including the departure of its founder, B R Shetty.

Shetty has stepped down from the board of the hospitals operator with immediate effect, as have chief investment officer Hani Buttikhi and board member Abdulrahman Basaddiq.

The resignations follow Friday’s resignation of the company’s vice-chairman, Khalifa Butti Omeir Bin Yousef, and reports that emerged last week that Shetty had inaccurately recorded his shareholding in the company.

READ NMC Health executive vice-chairman resigns after shareholdings misreported

The latest problems started a week ago, as the Abu Dhabi-headquartered company revealed that it was not clear how many shares exactly were owned by Khalifa Butti, Saeed Mohamed al-Qebaisi (aka Saeed Bin Butti) and Bavaguthu Raghuram (B R) Shetty.

A legal review carried out by Shetty and his advisers to verify his and his family’s interests had found that the exact size of the shareholdings of the trio had been “incorrectly reported historically to the company and the market”.

In his resignation letter to the board, non-executive director Basaddiq, who was not considered an independent director by virtue of being appointed by the company’s principal shareholders (namely Shetty, Saeed Bin Butti and Khalifa Butti), maintained that he had no knowledge of any possible transfer of ownership of shares between the principal shareholders in May 2017.

“We appreciate the difficult situation that he feels that he has been placed in as a result of recent notifications from our principal shareholders, but the board accept the reasons why he felt he needed to step down from the board,” said Mark Tompkins, the chairman of NMC Health.

Tompkins, who had previously shared the chairman role with Shetty, said the board also understood why Buttikhi had stood down.

Buttikhi and Basaddiq were both thanked by Tompkins for their contributions to NMC; Shetty was not.

Shares in NMC Health were up 2.6% at 794.8p in late afternoon trading.

NMC Health crisis: What has happened so far

Shares in NMC have taken a pounding in recent months, adds Calum Muirhead, falling over 60% since mid-November and more or less guaranteeing that the firm will be booted from the FTSE 100.

The share price collapse seems to have been sparked by hedge fund and activist short-seller Muddy Waters, which on 17 December published a scathing report highlighting what it said were “serious doubts” about the company’s financial statements which gave rise to concerns over “fraudulent asset values and theft of company assets”.

Muddy Waters continued its broadside by stating that it believed NMC had “manipulated its balance sheet to understate debt” to the tune of around US$320mln as of its 2018 financial year, while also raising doubts about the independence of several board members and the relationship between the company and its auditor, Ernst & Young.

The company quickly hit back the next day in a bid to stem the ensuing share price plunge, which had seen the stock lose 32% of its value in a single session.

NMC said Muddy Water’s accusations were “principally unfounded, baseless and misleading, containing many errors of fact” as it launched a US$200mln (£153mln) share buyback, seemingly to shore up the value of the stock.

The shares received another boost on 23 December when the company said it would be opening an independent review into allegations against its accounting practices made by the short seller.

Muddy Waters, however, remained unconvinced by the firm’s efforts, saying on Christmas Eve that such reviews were “usually exercises in whitewashing that provide little to no transparency or accountability”, highlighting similar moves by company’s such as commodities trader Noble Group and Chinese forest plantation group Sino-Forest which were “exonerated by their purportedly independent reviews, only to collapse later”.

The back-and-froth continued over the Christmas and New Year period, with the share price continuing to edge downwards.

NMC’s misery was compounded on 8 January as its two largest shareholders unveiled plans to sell off a £373mln stake to cover their debts.

Abu Dhabi investors Saeed Mohamed Butti Mohamed Khalfan Al Qebaisi and Khalifa Bin Butti owned 17.4% and 15% holdings in the firm before the sale. The fact that Khalifa Bin Butti was NMC’s executive vice-chairman also worsened things on the PR front.

Matters escalated when the company brought in Louis Freeh, a former federal judge and Federal Bureau of Investigations (FBI) director, and his firm Freeh Group to examine and compile a report regarding allegations raised in the Muddy Waters report.

However, the news failed to stop other major shareholders dashing for the exit, with Emirates NBD, a bank owned by the Dubai government, offloading a 1.04% stake in the group for £27mln in late January.

As the year moved into February, it became the turn of the firm’s directors to head for the door.

Aforementioned executive vice-chairman Khalifa Bin Butti, who also has close links with NMC’s billionaire founder Bavaguthu Raghuram Shetty, resigned with immediate effect on 14 February. Followed by today’s exit of Shetty, Buttikhi and Basaddiq

The boardroom exodus had been preceded on 10 February by a legal review carried out by Shetty that stated the size of his shareholding in the company, along with those of departed vice-chairman Khalifa Bin Butti and major investor Saeed Mohamed Butti Mohamed Khalfan Al Qebaisi, had been “incorrectly reported historically to the company and the market”.

Where does NMC go from here?

With the company seemingly in intensive care, the one hope for NMC appears to be a takeover, with the group revealing last week that it had received two “highly preliminary” approaches about possible offers from US private equity firms, from Kohlberg Kravis Roberts (KKR) and GK Investment (GKI).

The embattled group said neither potential offeror has yet made a proposal and there have been “no discussions as to the terms of any possible offer”.

However, Muddy Waters, whose report has seemingly caused the near-total collapse of a blue-chip firm, remained unconvinced of a buyout rescuing the firm from its predicament.

Carson Block, the New Jersey short seller and founder of the hedge fund, dismissed the “bizarre disclosures” about private equity interest in a statement on 10 February, adding that it would be “hard for us to believe [a takeover offer] would survive due diligence”.

This view was echoed on Monday by AJ Bell investment director Russ Mould, who said it was “highly questionable” whether a buyer could look past the current issues at NMC, adding that the fact it did not know exactly who owned large chunks of its share capital was “damning”.

Muddy Waters itself has remained unmoved in its stance of dubious activity, saying the news of unknown shareholdings among NMC’s major shareholders and directors “weigh heavily in favour of our conclusions”.

–Adds NMC timeline of events and updates share price–