April 4, 2018 / 5:41 AM / a year ago

Australia's Blue Sky in sell-down as fight escalates with U.S. short-seller

SYDNEY (Reuters) - Shares in Australia’s Blue Sky Alternative Investments plunged to a one-year low on Wednesday after U.S. short-seller Glaucus Research Group claimed it had overstated its size, exaggerated performance and over-valued assets.

Blue Sky is the second firm to be targeted by Glaucus in Australia, after sandalwood company Quintis, introducing an activist short-selling element to a normally sedate market.

Shares in Blue Sky, which said the claims are incorrect and misleading, were down almost 20 percent in afternoon trading after coming out of a trading halt. It was their biggest intraday fall since listing in 2012.

The halt was sparked by last week’s report in which the California-based shortseller said the investment company overstated its fee earning assets under management by about A$2.5 billion ($1.9 billion).

Blue Sky managing director Robert Shand said on Wednesday the company stood by its reporting practices.

“The structure of Blue Sky fees is consistent with market practice in Australia and they are absolutely fair,” Shand said on a telephone conference.

The investment company said on Tuesday in a 12-page response to Glaucus that the short-seller’s analysis was “fundamentally flawed”.

It said the Beach Burrito restaurant chain was held at a value of less than one third the amount Glaucus had claimed.

Blue Sky has lost about A$319 million since the Glaucus report was made public and has referred the shortselling to the corporate watchdog, the Australian Securities and Investments Commission (ASIC).

ASIC did not immediately return calls seeking comment.

The U.S. fund’s first target, Quintis, is now in administration after a report released in March 2017 detailed the Ponzi-like structure of the listed manager.

($1 = 1.2977 Australian dollars)

Reporting by Paulina Duran and Jonathan Barrett in SYDNEY; Editing by Stephen Coates

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