Blue Sky MD writes open letter on short seller attack
Written on the 9 April 2018 by Ben Hall
Blue Sky Alternative Investments (ASX: BLA) managing director Robert Shand has written an open letter to investors promising to improve communication with them while reassuring the market it is in "very good shape" with a strong balance sheet.
The company took the unusual step of releasing the letter on the ASX following repeated attacks by US short seller Glaucus Research which claims Blue Sky has "wildly exaggerated" its assets under management (AUM) and that its share price is only worth $2.66.
"Over the last 10 days, our company has been attacked by a foreign activist short seller," Shand (pictured) says in the letter.
"Regrettably this is relatively new in the Australian market. The only long term solution to this attack is to continue to demonstrate the performance of our business through continuing to grow our fee-earning AUM and delivering return for our investors.
"In parallel, we must better communicate to the market what we do and how we do it.
"Whilst this occurs, you may rest assured that our business is in very good shape. Our balance sheet is exceptionally strong."
The Brisbane-based Blue Sky and Glaucus have been involved in the bitter stoush over the past 10 days, resulting in BLA shares plunging around 50 per cent to its current price of $5.70.
Blue Sky has repeatedly denied it had fudged its numbers on AUM and also called on the Australian Investments and Securities Commission (ASIC) to launch an investigation into the short selling hedge fund.
Glaucus last Thursday issued its own rebuttal saying: "Rather than address our report on its merits, Blue Sky has doubled down on obfuscating simple details about its business. Instead of transparency, Blue Sky has fallen back on threats and recriminations.
"We simply do not see how investors can have any confidence in a Blue Sky management team that cannot answer basic questions about its fee structure, AUM and historic performance."
Blue Sky continued the tit-for-tat claims by addressing Glaucus' "second opinion" by saying it raises no new allegations.
"The Board confirms our previous standing invitation to the short seller to meet with us to discuss and clarify any further issues which they may have," Blue Sky says in its ASX statement.
Glaucus says its analysis estimates that Blue Sky's AUM does not exceed $1.5 billion, 63 per cent less than the company's reported figure.
In February, Blue Sky's CEO Robert Shand (pictured) delivered a first half underlying profit by 59 per cent to $16.1 million and reported its its fee-earning AUM rose by $1.2 billion to $3.9 billion.
The company also said it was targeting AUM of between $5.5 billion and $6 billion by June 30, 2019, with the growth to be driven by demand from institutional investors.
Previously Glaucus launched a similar damning report on the now-collapsed sandalwood grower Quintis, saying in March 2017 that the company had a "ponzi-like structure".
That research prompted the price of the stock to plunge and receivers were appointed to Quintis in January of this year.
Business News Australia
Author: Ben Hall