(Adds Casino response, analyst, background, updates prices)
PARIS, Dec 17 (Reuters) - Shares in French retailer Casino fell more than 10 percent on Thursday after research firm Muddy Waters, founded by short-seller Carson Block, said it was one of the “most overvalued and misunderstood” companies it had ever come across.
Casino said the report contained “grossly erroneous allegations” that the group would answer in detail.
It added it had filed a claim with French market regulator AMF and reserved the right to take the matter to court. It did not give the details of its claim.
Casino shares closed down 11.5 percent at 43.335 euros, with dealers blaming the Muddy Waters report for the losses.
Shares in Casino’s parent company Rallye fell almost 20 percent, while the yield on Casino’s five-year bond rose to 1.62 percent from 1.4 percent at Wednesday’s close .
Muddy Waters says its mission is to foster financial transparency. It has issued a series of reports critical of companies, often leading their share prices to fall.
Its targets have included a number of Chinese companies listed overseas, as well as Swedish telecoms firm TeliaSonera and commodity trader Noble Group.
Muddy Waters said in a 22-page report, published on its website, that it had shorted shares and credit in Casino and Rallye, without giving details.
Shorting involves borrowing a financial instrument and selling it on the expectation of buying it back at a cheaper price, thereby making a profit.
JP Morgan Cazenove analysts said in note that the numbers used by Muddy Waters “painted the worst possible picture” for Casino, and that lower earnings estimates and higher debt “results in materially higher leverage ratios than the reality.”
“We strongly disagree with comments implying that Casino’s equity could be worth as little as 7 euros per share,” they added, reiterating an “overweight” rating that it gave the stock on Wednesday.
Casino announced on Tuesday a 2 billion euro ($2.2 billion) plan to sell part of its real estate portfolio in Thailand and Colombia as well as its Vietnam operations as part of a programme to halve the group’s debt.
Credit rating agencies Standard and Poors and Fitch confirmed their investment-grade ratings on Casino at “BBB-“ with stable outlooks on Wednesday.
“We view these (sale) plans as a positive demonstration of management’s financial policy commitment to reduce the group’s debt and strengthen its balance sheet,” analysts at Standard and Poor’s wrote in their bulletin on Wednesday.
$1 = 0.9250 euros Reporting by Alexandre Boksenbaum-Granier, Pascale Denis, James Regan, Alistair Smout and Maya Nikolaeva; Editing by Lionel Laurent and Mark Potter