Short seller hits Blue Sky, sends shares tumbling
Written on the 28 March 2018 by Ben Hall
Blue Sky Alternative Investments (ASX: BLA) has been placed in a trading halt after a short selling hedge fund released a report which claims its fee earning assets under management (AUM) have been exaggerated.
Brisbane-based Blue Sky has requested the trading halt to "review and respond" to the report by Glaucus Research which has sent its share price sharply lower in Wednesday trade.
At one stage, BLA shares plunged 16 per cent to $9.41 but when trading was halted they recovered to be down by 9 percent at $10.40.
The Glaucus report 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.
"We believe that Blue Sky is significantly overstating its fee earning assets under management by reporting the gross value of certain assets as assets under management instead of the fair value of the capital invested," Glaucus says.
Glaucus also claims Blue Sky may be compensating for its overstated assets under management by charging clients egregious management fees and estimated that BLA shares are actually worth $2.66 per share.
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