Carson Block said a company's 'financial statements are literally meaningless' ? and the stock tanked

Shares of French retailer Groupe Casino plunged after short seller Carson Block, the founder of Muddy Waters Research, issued a report calling the company "one of the most overvalued and misunderstood" he has ever seen.

Groupe Casino fell 11.5% on Thursday to €43.34, while shares of parent company Rallye fell 19%, to end the day at €13.55.

"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.)," the Muddy Waters report said.

Muddy Waters then went on to compare the company's largest shareholder Jean-Charles Naouri to the "geniuses" who founded defunct hedge fund Long-Term Capital Management.

"...Jean-Charles Naouri is a genius. He won first prizes in France's high school Latin and Greek exams, completed his baccalaureate degree at 15, and earned a PhD in math in only one year. Like the geniuses who founded the hedge fund Long-Term Capital Management, which spectacularly collapsed, Mr. Naouri has an affinity for leverage."

Muddy Waters' report says that Casino is "is dangerously leveraged."

He believes that shares of Rallye are likely going to zero.

In a statement, Rallye said the Muddy Waters' report "contains grossly erroneous allegations that the Group will not fail to answer in detail."

"In light of this dissemination of misleading information, Rallye has filed a claim with the Autorité des Marchés Financiers and reserves the possibility to exercise its rights before national courts, including criminal courts," the company said.

Here is the Rallye share price: