(Reuters) - Shares of Farmland Partners Inc (FPI.N) plunged 40 percent on Wednesday after a short seller posted a report critical of the real estate investment trust’s finances, findings that the company’s chief executive called “fundamentally inaccurate and misleading.”
Farmland shares plummeted to an all-time low on record trading volume after the report was posted on the popular investor blog site Seeking Alpha (seekingalpha.com). The shares closed down 39 percent at $5.28. The article, posted by a short seller who publishes on the site under the pseudonym “Rota Fortunae,” was titled “Farmland Partners: Loans To Related-Party Tenants Introduce Significant Risk Of Insolvency - Shares Uninvestible.” Among factors highlighted were loans to individuals associated with the chief executive and Farmland’s cash levels.
In a phone call with Reuters, Farmland’s chief executive, Paul Pittman, said that there is “utterly no risk of insolvency” for the company. Pittman confirmed that Farmland, a REIT that generates rent from farmers on about 166,000 acres of cropland, had made loans to the people mentioned in the article as part of the company’s tenant loan program, under which it offers lender-of-last-resort loans that are secured by real estate. But he said Farmland had not “made any loans to related parties that are not appropriately disclosed.”Pittman also disputed the short seller’s assertion that Farmland faces a “significant risk of insolvency.” “We’re not near insolvent,” he said. “We’ve not overpaid. Our properties are valuable. They continue to be valuable. Our rents are in fact going up.” In the first quarter, Farmland reported rent revenue of $9.94 million, up 46 percent from a year earlier.
Farmland’s stock has a relatively high portion of short interest, a measure of the volume of bets that its shares will fall, accounting for 10.9 percent of the shares on the public market, according to S3 Partners. Short sellers seek to profit by borrowing shares in hopes of buying them back at a lower price later and pocketing the difference. Rota Fortunae, Latin for “Wheel of Fortune,” disclosed that it has an unspecified short position in Farmland shares. It has also posted articles on Seeking Alpha critical of other companies, including Hudson Technologies (HDSN.O) and K12 Inc (LRN.N).Hudson shares fell 10 percent on May 2, the publication date of one of the posts, and 1.4 percent on May 9, when another was published. For K12 Inc, its shares fell 1.5 percent on April 16 and 0.6 percent on April 18, the dates of Rota Fortunae’s posts.
Reporting By Sinéad Carew; Editing by Dan Burns and Leslie Adler