Groupe Casino (CO FP) is one of the most overvalued and misunderstood companies we have ever come across. The basic problem with Casino is that its financial statements are literally meaningless to understanding the company’s (poor) health. They do not distinguish between what Casino owns and what it owes. (Spoiler: we estimate Casino’s LTM leverage ratio at 8.9x.)

Casino’s response to our short thesis reminds us of the reaction from Noble Group (NOBL SP) to our April 2015 short thesis. When we shorted Noble it was rated BBB- (like Casino). We criticized Noble for its leverage and aggressive accounting (similar to our criticism of Casino). Noble has since been downgraded by both ratings agencies and its stock has declined by 64%. To encourage transparency and accuracy we’re publishing a list of 10 questions for the company to answer on the January 14th call. Many of the questions get to the heart of whether there is truly a recovery in Casino’s France retail business. Addressing our questions will go a long way toward allowing investors to determine whether our opinion, that Casino is a highly-levered, poorly performing business being hollowed-out and managed primarily to buy time for the massive debt its controlling shareholder has amassed, is reasonable.

Based on new information, we are revising downward our estimate of 2014 adjusted France retail EBITDA by 9.1%. Our investigators uncovered strong evidence that indicates in H2 2015 Casino has stretched payables to its suppliers in France to levels beyond what was typical of Casino, and generally accepted in France. Casino’s announced sale of its crown jewel stake in BigC Thailand validates our thesis that the company is hollowing itself out in order to sustain the debt load largely held at the parent level and at Rallye.

In December 2015, Muddy Waters Capital warned about Casino, Rallye, and their management – in particular Jean-Charles Naouri. We stated that Casino was being hollowed out to support an unsustainable debt burden in the holding companies above it. We also made clear that Casino was materially misleading investors about its finances in order to perpetuate this structure that essentially served the interests of only one individual: Mr. Naouri. Today’s news that Rallye, Finatis, Euris, and Fonciére Euris have entered safeguard proceedings due to financial distress likely marks the beginning of the end for this financing structure, which has been a parasite on Casino for years. It is also a resounding vindication of the warnings we sounded in 2015. However, we do not celebrate.