Rural Funds Group rebuts short seller's hit

Natasha GillezeauReporter

Aug 6, 2019 — 5.03pm

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Mr Bryant said Rural Funds had contacted ASIC on Tuesday morning to “invite them to take a look at all our records”, and is also looking for another accounting firm to examine its accounts, which have been audited by PwC.

“The report accuses us of fraud, and that comes as a surprise. We absolutely deny it. My response is that our accounts are 100 per cent accurate," Mr Bryant said.

Activist short seller Bonitas Research took aim at ASX-listed farm owner Rural Funds Group in a detailed report released on Tuesday morning, saying its equity is "ultimately worthless".

Rural Funds shares plunged 42 per cent in early Tuesday trade to $1.36, before the ASX granted the company a trading halt that will stay in place until Thursday morning.

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Rural Funds Group equity 'ultimately worthless', says short seller

Bonitas Research accused Rural Funds of overstating its 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".

Mr Bryant said the company would provide "a line by line response" to the Bonitas Research report within 24 hours.

"The business is completely above board. It is very sound, as time will prove, and the accounts are 100 per cent accurate, as audited by PwC," said Mr Bryant.

"What we will do from here is work to ensure maximum transparency with the objective being that we look after the unit holders of Rural Funds Groups."

Rural Funds has been one of the star performers among the listed property sector, outperforming some of its bigger commercial property rivals in recent years.

Portfolio manager Oscar Oberg, who works at small-cap specialist Wilson Asset Management, said the quality of short seller reports varies but "more and more" were likely to hit the public domain.

"Generally, I would say they are good to be in the market because it means that any irregularities in accounting are more likely to be flagged, which keeps companies and boards on their toes," said Mr Oberg.

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Rural Funds managing director David Bryant rejected Bonita Research's negative report and said that the company will issue a "line by line" response shortly. Supplied

"You hope that the authors are putting in lots of work like Glaucus did with Quintis," he said. "But every time you see one, don't assume that the same level of work has gone into it."

Bonitas Research was founded by Matthew Wiechert, who previously co-founded Glaucus Research Group with Soren Aandahl before the duo parted ways in early 2018.

Mr Oberg said he was not a specialist on Rural Funds, and couldn't speak to the "veracity" of the Bonitas report.

He said in general negative reports that ultimately proved sloppy or inaccurate could actually create "buy" opportunities

This looks like quintis all over again.