The Quintis Ltd (ASX: QIN) share price crashed nearly 75% over last week and is yet to return to trade this week as the WA-based sandalwood grower and seller continues to face down negative accusations from short selling hedge funds about its business practices.
The latest short seller to circulate negative research over the business is Viceroy Research, which has alleged that Quintis has booked non-existent institutional sales of its sandalwood, used debt finance inappropriately, and engaged in extremely poor corporate behaviour among many other shocking allegations.
After similar allegations were made by a U.S. hedge fund named Glaucus in late March the chief executive officer of Quintis, Frank Wilson, tended his resignation.
At the time the sandalwood company claimed Wilson was plotting to potentially take control of the business by taking it private with the support of an international financial backer. However, nothing has materialised on this front and the company faces a massive challenge in disproving the allegations against it in order to restore investor confidence in its claims over the potential cash generative value of its sandalwood assets.
The company itself is still forecasting for financial year 2017 "cash EBITDA" to be up 25% on FY 2016's result, with the first half of FY 2017 producing $7.6 million in "cash EBITDA".
However, the company is expected to provide an "announcement on the impact of the market and trading conditions on the Company's expected financial results and strategic outlook" before it commences trading again. This could be bad news, although with the stock already in free fall it's clear the market and debt rating agencies have now taken a negative view on the business.
It seems that the share price is likely to remain extremely volatile moving forward and given the serious allegations about the company it's definitely not investment grade in my opinion.
