This article is from the Australian Property Journal archive
LISTED agricultural assets owner Rural Funds has dismissed allegations by Hong Kong-based Bucephalus Research that is a Ponzi scheme “that could collapse at any time”.
The HK advisory firm said it conducted its own research into RFF after US-based short seller Bonitas Research released its report. The two companies are not related.
“In August, Bonitas Research accused Rural Funds Group (“RFF”) of fraud and asset inflation. We have had a look and are very concerned.
“Criminal fraud is hard to prove, but we see a clear cut case of financial engineering and creative accounting being used to inflate asset values and line the pockets of the management company,”
Bucephalus added: “RFF’s unitholders (mainly Australian retail or pension fund investors) are no doubt very happy with the performance of their investment so far, but we believe they are inadvertently being drawn into a Ponzi scheme that could collapse at any time.”
The firm indicated RFF’s fair value was between $0.80 and zero.
“Unfortunately, these numbers could still be too high, if the assets get revalued and the covenants are breached.
“We note that at RFF distributions exceed recurring profits, even ignoring cost capitalisation and capital raising continues,” the report said.
In a statement, Rural Funds Management Limited (RFM), the responsible entity for the Rural Funds said the Bucephalus report criticisms are substantially similar to those made in the recent documents selectively released by short seller Bonitas and referred investors to its previous ASX announcements and the Ernst & Young report.
Earlier this week RFF launched legal action against Bonitas, alleging it suffered loss and damage as a result of the making of the allegations, for which Bonitas and its principal Matthew Wiechert are liable to compensate RFM, including by way of an account of profits.
Last month Bonitas released a report that declared RFF stock was “worthless”. It wiped $355 million from RFF’s market capitalisation within 30 minutes of morning trade.
