Blue Sky, the Aussie investment manager that picked a global fight with a US hedge fund, enters receivership

There’s talking yourself up a little bit, and then there’s Blue Sky Alternative Investments.

The ASX-listed fund manager has appointed voluntary administrators, ending a tumultuous 12 months which saw a heated dispute with US-based Glaucus Research and $800 million wiped from its shareholder value.

And shareholder value is what the row was all about.

In March 2018, Glaucus issued a brutal opinion on Blue Sky — which held investments in online retail platforms Vinomofo and the collapsed Shoes of Prey — claiming Blue Sky “wildly exaggerates its reported fee earning [assets under management]” and “misrepresents the performance of its investments”.

Glaucus valued Blue Sky’s assets under management at $2.66 per share (or a total valuation of $1.5 billion) while the company itself put the figure at $11.43 per share (or $4 billion total value) — no minor rounding error.

But even the the 77% lower valuation of $1.5 billion might be “too generous”, Glaucus said, adding that “it would be reasonable for investors to value Blue Sky’s shares even lower”.

“Where the bottom is, perhaps not even Blue Sky knows,” the now-infamous research note from Glaucus said.

The publication of the note sparked an international war of words, causing Blue Sky’s managing director Rob Shand to fire back.

“The Glaucus opinion piece contains a range of allegations. These allegations are both fundamentally flawed and materially misleading,” Shand said in a statement.

“The reality of what has happened here – that a foreign short-seller can launch a co-ordinated attack in an opinion piece that bears no resemblance to reality with the explicit intention of profiting from it – is, I believe, appalling.”

But despite Shand’s protestations, seven months later, the Australian Financial Review’s Chanticleer column wrote that Blue Sky had come clean about its “dire position” after accepting a $50 million capital injection from another American hedge fund, Oaktree.

The column described Glaucus’s inflammatory research note as “pretty accurate”.

And now, Oaktree has appointed KordaMentha as receivers and managers of Blue Sky, and Pilot Partners as voluntary administrators.

The fund manager has now been officially suspended from official quotation on the ASX after entering receivership.

But the death knell has not be rung just yet.

Mark Korda, partner at KordaMentha, said it was business as usual while the forensic accountants do their work.

“The appointment will not affect the day-to-day operating activities of Blue Sky and its investment management business subsidiaries,” Korda said in a statement.

“Existing management and key contacts for relevant stakeholders, employees and unitholders will continue to be in place as per normal.”

However, the receiver also admitted that Blue Sky faces class action litigation and the Sydney Morning Herald has reported it has debts of up to $100 million.

The skies may prove a little dark after all.

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