US short seller ordered to pay $900,000 after nasty Rural Funds hit

Rural Funds Management wins $900,000 damages and costs claim

News
Aa

Rural Funds Management wins big payout after last year's share market assault by US share market short seller Bonitas Research.

Aa

Rural Funds Management will be entitled to almost $1 million in damages and court costs in the wake of last month's Supreme Court of NSW ruling against US-based share market short-seller Bonitas Research.

However, there is doubt about whether the group will ever see the money.

The legal case followed last year's share market assault on the 23-year-old farm sector asset owner and manager by Bonitas which accused Rural Funds of overstating the value of its $1.2 billion farming asset portfolio as much as 100 per cent.

The scathing attack also claimed the Australian company had fabricated rental income.

The Supreme Court awarded damages worth $530,201 and costs of $368,974 against the Texas company and its founder, Matt Wiechert, who also co-founded another high profile short-seller Glaucus Research.

Ignored Australian laws

The court found Bonitas contravened both the Corporations Act and the Australian Securities and Investment Corporation Act.

Its judgment noted Bonitas and its principal did not check with the group on any of the matters they made public.

RELATED READING:

Last month, when finding in Rural Funds' favour, Justice David Hammerschlag said he had no difficulty in concluding that Wiechart did not care if what was said was false.

He also noted Bonitas had "an obvious commercial interest in depressing the share price".

Rural Funds released a short notice to shareholders confirming the court decision but did not say whether it actually expected to be paid the money, given the US company is effectively safe from the Australian legal system's ruling.

US Constitutional protection

Bonitas claimed its investigative reporting activities, which sent the Rural Funds Group's share price crashing from $2.35 to $1.36 within an hour of the document's release, were protected by the first amendment of the US Constitution.

More than $335 million was stripped from Rural Funds Group's market capitalisation when the share price tumbled.

The short seller then stood ready to buy shares at the 50pc discount.

Bonitas reportedly responded to this week's court order with a provocative comment on social media claiming Rural Funds had not dared to sue Bonitas in the US because the short seller would have been granted discovery of key documentation about the fund's operational and financial performance which it believed would have supported its claims made on August 6 last year.

Rural Funds' investment objective is based around building a stable income stream from leasing its assets to large scale farming interests plus capital growth through any appreciation in the value of those assets.

While iIts shares made a relatively speedy recovery after the Bonitas attack last year, climbing to $2.17 a month later, they have since only hit highs of $2.08 in February, falling to $1.68 as the stock market collapse struck in March.

In the past week its share price traded around the $1.90 mark.

  • Start the day with all the big news in agriculture! Click here to sign up to receive our daily Farmonline.
Aa

From the front page

Sponsored by