Agricultural property investment group, Rural Funds Management, has been exonerated in court after taking a fierce stance against a US short seller's headline criticism of the the Australian agribusiness last year.
A NSW Supreme Court judge has blasted the allegations by Bonitas Research and its principal, Matthew Wiechert, saying the comments were "deceptive and likely to deceive".
Justice David Hammerschlag was scathing in his findings and assessment of the Texan hedge fund operator whose August 6 report claimed claimed Rural Funds had overstated its assets as much as 100 per cent, with Mr Wiechert arguing the listed business as almost worthless.
Bonitas alleged Rural Funds' $1.2 billion agricultural asset portfolio's true net asset figure was only about $268 million at the end of 2018.
Rural Funds' share price subsequently fell by almost 50pc to about $1.36 as the share market responded to the bad news, slashing about $335m from its Australian Securities Exchange market capitalisation.
The Bonitas report preceded something of a copycat commentary a month later by the Hong Kong based Bucephalus Research Partnership which accused Rural Funds of running something akin to a Ponzi scheme, fabricating profits and inflating its true asset values in its financial statements.
Bonitas had an obvious commercial interest in depressing the share price,
Justice Hammerschlag's comments this week followed the Supreme Court finding Bonitas and Mr Wiechert had made statements in Australia which were false and materially misleading.
"Bonitas had an obvious commercial interest in depressing the share price," he said
"Neither Bonitas nor Wiechert took the trouble to check with or inquire of Rural Funds as to any of the matters which they broadcast."
The court will make a call on a damages retribution payment to the Rural Funds Group next month
The court ruling said the company had breached several sections of the Corporations Act and the Australian Securities and Investment Commission Act.
"Wiechert is, no doubt, a sophisticated operator," the judge said.
"I have no difficulty in concluding that they did not care whether what they were saying was false."
Wiechert had previously co-founded US trader, Glaucus, which was responsible for crippling short selling attacks on agricultural investor, Blue Sky Investments, and sandalwood producer, Quintis, in 2018.
US defence claim irrelevant
He had argued that as a US-based business he was outside Australia's regulatory scrutiny, however, Justice Hammerschlag said the operation of the US Constitution and the laws of the state of Texas were not relevant to proceedings in Australia.
The judgement will come as a relief to Rural Funds managing director, David Bryant, who said last year he was unsure if a win in court would cover the company's legal costs, but he wanted to clear Rural Funds Group's name.
He was intent on "shooting home a clear message" to anybody tempted to ridicule his organisation's financial reporting with unsubstantiated claims.
He hoped legal action could also save others from future similar unfair accusations at the hands of opportunistic traders.
"We are telling the truth. We want to make sure this bloke, or anybody else doesn't feel they can get away with this sort of thing," he said.
Rural Funds' assets include cattle country in Queensland, NSW and Western Australia, vineyards in South Australia and Victoria, macadamia plantings in Queensland and irrigated cotton farmland in NSW.
Last year the company offloaded its long-held investments in poultry meat production and bought extra beef properties in WA.
It's share price jumped after the court finding was announced, breaking the $2 mark - almost back to its August 2019 peak of $2.17.
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