Short-seller Carson Block, founder of Muddy Waters Research, continued his attack against Singapore-listed Olam International on Tuesday, characterizing the company's $1.25 billion fund-raising plan as a "sovereign bailout" a week after the commodities trader said it had enough liquidity.
Block, who has alleged accounting irregularities, aggressive spending and high debt levels at the coffee to cashew nuts supply-chain manager, also gave Olam between six to eight months to survive depending on the rate of "cash burn."
Still, investors seem to be giving Olam the benefit of the doubt. The company's shares rose as much as 8.6 percent after a trading halt was lifted on Tuesday responding positively to the capital raising plan announced on Monday.
The rights issue has the support of Temasek, which owns 16 percent of the company.
Muddy Waters' Block, however, believed the rights issue was an admission of weakness.
"We view this debt offering as a clear victory," Block told CNBC Asia's "Squawk Box". "Less than a week ago we warned Olam might collapse. We now effectively have a stop-gap sovereign bailout of the company…$750 is just small chunk of what we think they need to raise just to last a year."
Olam's rights issue will comprise of $750 million in bonds with a five-year maturity and a cash coupon rate of 6.75 per cent, and 387.4 million free detachable warrants worth up to US$500 million. The bonds will be priced at 95 percent of the principal amount.
The proceeds of the rights issue, which will be underwritten by Credit Suisse, DBS, HSBC and JP Morgan, will be used to repay debts and to fund working capital until early 2014.
Block confirmed his firm is "absolutely" shorting Olam stock, or making bets that the security will fall. He declined to disclose how large this position was.