Until Glaucus released their report in mid-March, BLA stakeholders (such as shareholders, auditors and analysts) were:
- happy for a large Executive Board who had significant vested interests in reporting upward trending results, with only a small minority of independent non-executive directors contrary to ASX best practice guidelines.
- accepted BLA's use of aggressive AUM guidance (announced target $10 billion) as the way for the company to communicate guidance, and were fine to pay Blackstone/KKR multiples for an AUM number, when half of the portfolio is in property which should attract about a 1x multiple.
- were told to compare BLA against Blackstone/KKR type metrics when reporting that AUM was $4.0 billion, but not that that number included $764 million of undrawn debt (!) or $380 million of drawn debt, which is what a property manager would do.
- accepted front loaded performance fees not paid until exit being recorded in the income statement now in order to appear like a growth company delivering results on an upward trajectory.
- raised capital on the basis of reported numbers which didn't even begin to estimate the impact on the financials of new accounting standards which will require the unwinding the front-loading of performance fees on exit - something so significant that the company is still unable to quantify the impact that it will have on their financial statements. Yet even the existence of this possibility was disclosed as a minor footnote buried away in the back of their capital raising presentation from only two months ago!
- told by the CEO in June last year that private equity assets under management were $1 billion, yet when pushed to disclose last week were revealed to total $558 million, a discrepancy which the closed-end nature of the funds means cannot be explained by fund redemptions or investment exits
- ignored previous claims by short research such as Diogenes who questioned its fee structure, the debt within its funds, how it values those assets and its growing exposure to property, which the CEO dismissed as 'having factual inaccuracies', as well as concerns others primarily in the Brisbane investment community had around the numbers:
http://www.couriermail.com.au/busin...e/news-story/f9d9464d013a59c62583257840607e6d
Even if Glaucus had not published their report, this thing would already have unwound when they actually had to communicate their actual estimate of the impact of the new accounting standard which I suspect is going to cause a massive write-back to income out of their receivables. By publishing their report when they did and ultimately triggering the company to admit that this would have a 'significant impact' on their earnings, they protected anyone who was looking to buy BLA either directly or in their ASX300 index fund by not having to overpay by 300% compared to where fair value is now assessed by the market.
This was not manipulation by Glaucus, rather them effectively calling out a whole range of issues which others had chosen to look past for years. I hope they have their next ASX company target in their sights so that ASX investors don't keep overpaying for a company which has been inflated by an executive board and cowboy management by obfuscating the true picture of what is going on.
