Australian agriculture real estate investment trust Rural Funds Group (ASX: RFF) has commenced legal proceedings against US-based short sellers Bonitas Research and its principal Matthew Weichert.
The proceedings relate to a short selling report published by Bonitas in early August which saw the shares in Rural Funds dive by 43 per cent.
Bonitas described the firm as an "ASX listed fraud" and claimed that the company was "worthless".
In its report, Bonitas calculated net assets should be worth half that at $268 million, a value which would be in breach of its $400 million net asset loan covenant.
Bonitas alleged RFF's privately-held business Rural Funds Management (RFM) had been created to siphon proceeds from requity issuances and borrowings.
The Texan group also claimed reported profitability had included "fabricated" rental income of $28 million by RFF's two largest third-party lessees, almond producers Select Harvests (ASX: SHV) and Olam Orchards.
Rural Funds has since denied the claims included in Bonitas' report, and commissioned an independent report by Ernst & Young released on 27 August which concluded that the Bonitas claims were not substantiated.
Specifically, Rural Funds is contending that the allegations made by Bonitas and principal Matthew Merichert breach sections of the Corporations Act and the Australian Securities and Investment Commission Act pertaining to the publication of false or misleading statements.
"RFM alleges that it suffered loss and damage (both in its own right as well as in its capacity as responsible entity for RFF) as a result of the making of the allegations, for which Bonitas and Matthew Wiechert are liable to compensate RFM, including by way of an account of profits," says Rural Funds.
Shares in Rural Funds are up 0.25 per cent to $2.04 per share at 10.47am AEST.
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Business News Australia