The Rural Funds Group (ASX: RFF) share price closed 12% lower at $1.77 today on the back of Hong Kong-based investment research firm Bucephalus Research joining US-based short seller Bonitas Research in labelling the farmland lessor a 'Ponzi scheme'.
The explosive allegations that RFF and related parties inflated asset valuations and falsified income to con investors have been firmly rejected by RFF's management team.
It even paid 'big 4' auditor, Ernst & Young, to take a look at the allegations and released EY's report that concluded the short seller's allegations were 'unsubstantiated' on the evidence provided by RFF .
RFF has also launched legal proceedings against Bonitas for financial compensation due to damages incurred over what it claims are the false allegations.
When short sellers attack a company 'sentiment' is a key short-term driver of a stock's price and it seems that the opinion and report of a second short seller has unnerved shareholders.
According to news reports in Business Australia, Bucephalus claims RFF shares are worth $1.20 based on a "generous appraisal" of accounting profits, or just 73 cents based on a "reported cash flow basis".
The Business Australia interview with the short seller also contains other worrying opinion over the whole controversy.
RFF has dismissed the latest allegations as "substantially similar" to Bonitas's allegations and insists shareholders have nothing to worry about.
Unfortunately this story could rumble on with it being hard to draw definitive conclusions given the opaque nature of an agricultural REIT and differing allegations.
