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Why Blue Sky Alternative Investments Ltd shares are now down 90% in 2018

Shares in troubled asset manager Blue Sky Alternative Investments Ltd (ASX: BLA) sunk to a new low of $1.46 in trade today after the Brisbane-based group admitted it was the subject of an investigation by the regulator ASIC over its continuous disclosure compliance during the first half of 2018.

The stock has now lost 90% of its value since changing hands for $14.60 in January 2018 in a fall that is sure to leave its investors and class actions lawyers chomping at the bit to bring a compensation claim against it for potential breaches of the Corporations Act including potentially under s.674 that requires continuous disclosure of material information.

Already, legal eagles Piper Alderman and Gadens are inviting aggrieved shareholders to register their losses, with Blue Sky accused of, inter alia, exaggerating assets under management, misrepresenting performance of its investments and over-charging fees. In fact it recently came out in the wash that Blue Sky was including undrawn bank debt facilities when calculating the estimated value of some its real estate related assets under management.

It seems that investors in Blue Sky’s funds and shareholders may be eligible to claim against the group in a double whammy the if allegations are proven.

Given the serious problems Blue Sky looks a textbook shambles for investors to avoid, with multiple red flags highlighting its shot credibility as an investment grade asset manager.

Moreover, since the allegations against it became public many of Blue Sky’s senior management including its ex-CEO and two directors have done a Captain Schettino in abandoning ship, while claiming there’s little to worry about it.

The company’s founder is reportedly also long gone and given the allegations now surfacing it’s not surprising many of those in a position of responsibility are looking to distance themselves from the group’s practices.

Where ASIC’s investigation leads is unknown, but Blue Sky Alternative Investments does not look a turnaround opportunity for level-headed investors.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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