MILAN (Reuters) - Italian bio-plastics company Bio-on denied allegations of accounting irregularities by U.S. hedge fund Quintessential Capital Management, saying it was considering legal action against the fund.
Bio-on shares were suspended from trading for excessive volatility and were indicated down 10.3% after the allegations, included in a report dated July 19 and posted on Quintessential’s website, were picked up by Italian media on Wednesday.
Quintessential said in the report it had an economic interest in the price movement of Bio-on shares, which typically means it has a short position on the company’s stock.
In a statement, Bio-on said it “completely denies allegations of wrongdoing by its management and that the company is providing false information to the market.”
In its report, Quintessential called Bio-on “a massive bubble based on flawed technology and fictitious sales thanks to a network of empty shell companies.”
In a later statement, Bio-on said its plant near Bologna, which Quintessential said appeared to still be incomplete and not in operation, was running and in production. It added that E&Y had signed off on its 2018 accounts without reservations, adding it would publish an in-depth document later on Wednesday.
Bio-on is listed on the AIM market, a segment of the Italian stock exchange dedicated to small and medium-sized companies. It produces what it says are environment-friendly plastics for the agri-food, design and cosmetics industries and has a market capitalization of just over 1 billion euros ($1.1 billion).
Quintessential is a New York-based hedge fund which says it specializes in exposing corporate wrongdoing.
Last year, a report by the fund into Greek jewelry maker Folli Follie led to an investigation from Greek authorities, the resignation of the company’s founders and the firm seeking protection from creditors.
Reporting by Silvia Aloisi; Editing by Keith Weir and Mark Potter
Our Standards: The Thomson Reuters Trust Principles.