Court blasts short-seller for 'false' Rural Funds Group allegations
By Colin Kruger Sydney Morning Herald ckruger@smh.com.au
February 12, 2020
Rural Funds Group achieved a comprehensive legal victory over Texas-based short-seller Bonitas Research on Wednesday, as the NSW Supreme Court found that allegations against the real estate investment trust were "false in material particulars or were materially misleading".
Bonitas sent RFG's share price plunging in August last year after it released a report alleging RFG's accounts included fabricated rental income and claiming the trust was ultimately worthless.
"I am satisfied that they knew or ought reasonably to have known that the statements and information were false in material particulars or were materially misleading. They did not care that they were false," said the judgment from Justice David Hammerschlag.
Bonitas is a short-selling operation founded by Matt Wiechert, the co-founder of Glaucus Research which launched a withering assault on Australia's Blue Sky Alternative Investments in 2018. Short-selling is a trading strategy in which the trader profits from a fall in the target company's share price.
The ruling could prove to be significant, as a rising tide of attacks by overseas short sellers has led to complaints being lodged with the Australian Securities and Investments Commission (ASIC).
The regulator reiterated that the ASX remains the best platform for response to these attacks.
"We would not be able to comment on a specific matter – particularly one still before the courts," said an ASIC spokesman.
"But ASIC’s general position has consistently been to encourage companies, where possible, to address specific external criticisms with sufficient, usable information so that the market can form its own view."
In 2018, hedge fund VGI Partners publicly accused the $3 billion travel specialist Corporate Travel Management of aggressive accounting, poor disclosure and running "phantom" offices in Europe and America.
In October, WiseTech shares plunged after it was attacked by Beijing-based short seller J Capital, not long after US based Bayberry Capital targeted Treasury Wine Estates.