This article is from the Australian Property Journal archive
US-based short seller Bonitas Research has taken aim at ASX-listed Rural Funds Group, declaring its stock “worthless” in a report that subsequently wiped out $355 million from the RFF’s value in 30 minutes during morning trade.
Bonitas was founded by Matt Wiechert, who co-founded Glaucus Research, which produced a similarly scathing report on Blue Sky Alternative Investments last year.
In a report published on its own site, Bonitas said evidence suggests that RFF’s reported profitability had included at least $28 million of “fabricated rental income paid to RFF by its two largest third-party lessees”.
RFF went into a trading halt shortly afterwards, until the earlier of a pending announcement or commencement of normal trading on Thursday.
RFM managing director, David Bryant rejected the report, telling The Australian, “The claims in the report are false, it seems to accuse us of fraud on a vast scale – that is false”.
Bonitas said it RFF had overstated its net assets by 100%, and the true net assets figure was only $268 million as of the end of 2018, which would put RFF in breach of its recently increased minimum $400 million net asset loan covenant, according to Bonitas.
“…As we have laid out in this report, we believe nearly 100% of RFF’s reported profits since FY17 are attributable to either fabricated rental income or non-cash gains from dubious fair value changes applied to RFF’s assets,” it said.
“We believe the outcome of corrected financial statements will reveal that RFF minority shareholders were always designed to be last in line when RFF’s capital raising days were over and the music stopped,” Bonitas said.
“Because of this, we are short RFF and believe RFF’s equity is ultimately worthless.”
