Blue Sky, the target of a short-seller’s analysis, has referred Glaucus Research to the corporate regulator ASIC (Australian Securities and Investments Commission).
“We are concerned that this may be a case of market manipulation,” Managing Director Robert Shand told an analyst call this morning.
“We have offered our full assistance to ASIC and look forward to working with them in the days and weeks ahead.”
The funds manager says it “categorically rejects” allegations by Glaucus Research in a note that it wrongly calculated the value of assets under management and charged exorbitant fees.
“These allegations are false and easy to discredit with the facts,” says Shand.
“Short sellers are not regulated in Australia. They claim that the report is not available to Australian residents and yet on the same day the report was released it became freely available … and was broadly distributed to the media.”
In the lead up to the release of the report, the short interest in Blue Sky tripled to 3 million shares.
In a series of tweets last Wednesday, Glaucus announced it was shorting Blue Sky and published its research.
Blue Sky shares fell more than 13%, prompting the company to call a trading halt. It is due to be restored to trading again this morning.
Glaucus believes that Blue Sky is overvalued by the market by as much as 77% and that its assets under management are only worth $1.5 million and not the $4 billion claimed.
However, last night Blue SKy issued a statement rejecting the allegations.
“The calculation of Blue Sky’s fee-earning AUM, which is in excess of $4 billion, is entirely in line with market practice in Australia and Blue Sky has adopted the same approach since it listed,” the company said.
“Blue Sky confirms that its approach is consistent with industry practices in Australia and the approach taken by a broad range of other ASX listed businesses.
“Blue Sky’s performance and management fees are entirely consistent with market practice in Australia. These fees are fair, both with respect to their quantum and the way they are structured. They are fully and fairly disclosed.”
Today Blue sky labelled the allegations as appalling.
“The reality is that we are in exactly the same position today as we were last week. The same team, we have the same track record and it is one we are proud of.
“We maintain a strong balance sheet with no net debt.”
Shand says he’s spending the rest of the day in Sydney meeting investors and analysts. Tomorrow he will be in Melbourne before returning to Brisbane.
“I would also like to take this opportunity to invite Glaucus to our offices,” Shand says.
“Our team would be more than happy to meet with them in person and correct any further misunderstandings.”
The analyst call allowed no questions.