Rural Funds Group equity 'ultimately worthless', says short seller In a detailed report released on Tuesday morning, Bonitas Research accused Rural Funds of overstating assets by 100 per cent and said the company's reported profits since the 2017 financial year were either fabricated rental income or non-cash gains on "dubious fair value changes". Rural Funds shares were down 42 per cent to $1.36 in early Tuesday trade, before trading was halted. Rural Funds is a real estate property trust that owns farms producing poultry, cattle, almonds and cotton. It is listed on the ASX with about a $790 million market capitalisation and had drawn debt worth $289.4 million as at December 31. The company is working on a reply to issues raised in the report and is expected to put out a statement to the market. The ASX is also involved. Bonitas is a short-seller that was founded by Matthew Weichert, who previously set up Glaucus Research. The report is the latest example of a short-seller running an activist campaign against an Australian company. Others include sandalwood grower Quintis and Blue Sky Alternative Investments - both Glaucus targets- and Corporate Travel Management. Other Bonitas targets include Hong Kong-listed down jacket maker Bosideng and Singapore-listed Best World. Rural Funds was the 100th most shorted stock on the ASX boards as at July 30 with 2.63 per cent of its stock reported as held short, according to Shortman. https://www.afr.com/street-talk/rur...y-worthless-says-short-seller-20190805-p52dwg https://www.bonitasresearch.com/company/rural-funds-asx-rff/
Skim read the report earlier in the day, appears at first glance they are putting on the table what they allege are questionable accounting practices. Rural Funds will have some answering to do. Agree, if that is indeed what you were implying, that it's frustrating if the shorters are just activists. That is often not the case as was shown with Blue Sky.
Was reading this in the SMH. Extract from said article. "According to Bonitas, that would put RFF in breach of its recently increased minimum $400 million net asset loan covenant. "And as we have laid out in this report, we believe nearly 100 per cent of RFF’s reported profits since FY’17 are attributable to either fabricated rental income or non-cash gains from dubious fair value changes applied to RFF’s assets," it said." PWC named as auditor.......They'll be pleased for the great PR.
Rural Funds has had - in my view - a straight arrow reputation. Massive damage in any case. Very hard to get undone even if accusations were found to be untrue. In the Australian Rural Funds Group rejects damaging report by short-seller Bonitas The listed Rural Funds Group has fired back at US-based short seller Bonitas Research after a negative report prompted a 335 million hit to the groups value. The Bonitas report, released on Monday night, claimed the listed orchard, farm and cattle station owner had inflated its profits and conducted “nefarious” transactions with an associated management company. RFM managing director David Bryant strongly rejected the claims. “The claims in the report are false, it seems to accuse us of fraud on a vast scale – that is false,” he said. The hard-hit company had a low profile in the real estate investment trust industry, even as it has grown to own about $920 million worth of agricultural assets, “We are preparing a line-by-line response to the report and aim to get that to the market as soon as possible,” Mr Bryant said, emphasising that it would take a transparent approach. “We’re keen that our investors, and the market, receive absolutely full transparency and we are working very quickly to provide all the information that people would want,” he said. Mr Bryant said the group had contacted the Australian Securities and Investments Commission and invited it to inspect its reports. RFM has also contacted independent lawyers and accountants to report on whether its accounts are true and accurate.
Can the ASX question detail in a companies financial tax returns? That return also presumably would have been signed off by an auditor.
Nope, that’s not their role. ASX questions material change that shareholders should have been made aware.
barneyrubble is correct. As to who can question in detail, that would be ASIC, shareholders, bankers / providers of financial services either directly or via the appointment of an Investigating Accountant (IA). With such news and a drop in the share price, I suspect RFG's bankers would have been on the phone within minutes and be setting up a meeting right away with RFG to discuss same and would probably have PWC in the room too to answer the questions. If the bankers get a smell that something amiss and that Bonita is onto something, they'll start pulling the numbers apart with a specialist IA. Whilst most companies (inc all ASX listed) have to be audited annually, there are examples where the auditors got it wrong or "saw things a different way" to use a phrase. I won't go into any Australian examples, but from overseas, Arthur Anderson and Enron is a prime example. I not suggesting there is something wrong at RFG as I'm suspect re the statement from Bonitas (given they are shorting the company shares) but merely stating auditors, even the big ones can get it wrong.
Like this: https://www.theglobeandmail.com/rep...s-after-accounting-questioned/article5529484/ 25% of RFF's FY18 lease revenue came from Olam.
