U.S. Markets

Hedge fund Kerrisdale sees Allied Minds falling as much as 67 percent

BOSTON (Reuters) - Hedge fund Kerrisdale Capital Management, which has made a big splash with public bets against big-name companies, said on Tuesday that business incubator Allied Minds Plc’s stock price is hugely overvalued and should fall by as much as 67 percent.

U.S.-based Kerrisdale is taking on Boston-based Allied Minds as its latest target, saying the early-stage venture firm’s portfolio companies, including a vendor of pasteurization equipment for nuts and prunes, are unlikely to see commercial success.

“Allied Minds is a true triumph of mind over matter, style over substance - a dressed up collection of high-risk gambles that we believe has at least 67 percent downside,” Kerrisdale’s portfolio manager Sahm Adrangi wrote in a report published on Tuesday.

In the report, Kerrisdale said, “one should assume the authors are short the shares of (Allied Minds).”

Since it listed shares in London last year, Allied Minds’ stock price has climbed to 509.00 pence, rising 34 percent this year and more than doubling from its IPO price of 190 pence.

Shares fell 11.6 percent to 455 pence on Tuesday.

U.S. fund firm Invesco and star manager Neil Woodford’s Woodford Investment Management are big holders of the stock.

But Kerrisdale, which manages only about $350 million but has a large following on social media and among industry analysts, says the company’s valuations are overly optimistic.

Calling Allied Minds’ portfolio full of “duds,” Kerrisdale wrote that it has not sold any of its portfolio companies, has not taken any one company public and has not generated material licensing revenues from its intellectual properties.

It is unusual for hedge funds to publicly say which companies they are betting against for fear management will cut off access to information about the company.

An Allied Minds spokesman was not immediately available for comment.

Kerrisdale has identified other companies that are overvalued. A year after taking on satellite communications company Globalstar Inc and calling it “worthless,” the stock price has fallen roughly 56 percent.

Editing by Jeffrey Benkoe