The ongoing tussle between Muddy Waters and Singapore commodities firm Olam International urther heated up after the short-seller published a much-awaited 133-page report on Tuesday detailing "shocking" accounting gaffes at the trading firm, prompting Olam to respond with a 45-page rebuttal on Wednesday.
But even as Olam described the accusations as "false and misleading" and stood by its practices, some analysts are now wondering whether there might be some truth in Muddy Waters' allegations.
Muddy Waters' report is "pretty good" and has raised many questions over Olam's accounting practices and finances that the latter will have to answer, Roger Tan, CEO of SIAS Research, told CNBC.
"They (Muddy Waters) have done extensive research into it," Tan said on CNBC Asia's "Squawk Box" on Wednesday. "They have even gone down to look at some of the investments and what the assets look like. And there are a lot of questions over how they (Olam) value these assets…a lot of questions over whether their profit is true and whether their cash holding is strong."
He added: "There are a lot of questions that Olam has to answer. Gven that there's so much detail in the report, I would say that to be fair to them (Muddy Waters), it looks like a pretty good report."
Olam has been diversifyinginto new areas in recent years through acquisitions and it now owns plantations and processing plants around the world.
Muddy Waters, in its report, criticised Olam's actions in many of those acquisitions. It alleged that the value of property, plant and equipment held by Crown Flour Mills (CFM), a Nigerian company that Olam acquired for $107.6 million in January 2010, was vastly overstated and that disclosures about the asset were misleading, Reuters reported.
Olam , in which Singapore state investor Temasek Holdings has a 16 percent share, refuted Muddy Waters' report in a statement on Wednesday, saying there is no risk of solvency and that it has sufficient liquidity to pursue its current business and future investments.
"We believe that the report's assertions are motivated to distract and create panic amongst our continuing shareholders, bond holders and creditors," Olam said.
It added that its financial statements and accounting policies strictly follow and adhere to the Singapore Financial Reporting Standards (SFRS), and that it intends to claim damages for the "unfounded allegations."
"Our message to Carson Block and Muddy Waters is therefore clear - this time the mud won't stick," Olam said.
On Wednesday morning before the Singapore market opened at 9am local time (0100 GMT), Olam asked for a halt in the trading of its shares, which was lifted once it released its rebuttal to the Muddy Waters' report around 10.05am (0205 GMT). Its shares fell more than 5 percent soon after the halt was lifted, but have since recovered and were trading half a percent higher at 12.15pm (1215 GMT).
Olam has shed about 10 percent of its value since November 19 when Muddy Waters' founder Carson Block criticized Olam's debt levels at an investment conference in London and attacked the company's accounting practices.
James Koh, investment analyst who covers the stock for Maybank Kim Eng Securities in Singapore, said Muddy Waters' arguments are "pretty strong."
"A lot of the arguments (by Muddy Waters) are suggesting aggressive accounting," Koh told CNBC. "And I think Olam will say that these are all done within rules of law. But I have to say that the arguments that Muddy Waters have presented are pretty strong. They did a lot of work which not many people have been able to do."
He said he will continue to approach the company with caution. "We have always had a hold on Olam, and certainly won't be recommending that investors buy on weakness," Koh added.
-By CNBC's Jean Chua.