Rural Funds Respond to ‘False and Misleading’ Ponzi Scheme Claims


Embattled agricultural landholder Rural Funds Group has responded to the latest round of claims that it inflated the value of more than $900 million of agricultural assets through “creative accounting” and financial engineering.

The accusations, from Hong Kong-based Bucephalus Research Partnership, follow on from a series of claims by activist short seller Bonitas, which accuse Rural Funds of fabricating profits and net asset values in its financial statements.

The manager of the ASX-listed Rural Funds Group, Rural Funds Management, rejected the claims—which it described as substantially similar to Bonitas’—and pointed to legal action it has commenced against Bonitas in the NSW Supreme Court.

In a 17-page report released last week, Bucephalus sensationally claimed that Rural Funds shareholders were being drawn into a “Ponzi scheme that could collapse at any time”, accusing the manager of inflating asset values and raising capital to fill the gap.

Bucephalus went on to claim that $1.20 represents “generous fair value” for the stock, warning unitholders that the number could still be too high if the group is forced to revalue its assets.

Bucephalus’ release sent the property owner’s shares crashing, with the group losing 20 per cent at the back end of last week. In early August, Bonitas’ initial series of allegations sent Rural Fund’s share price crashing 43 per cent.

Rural Funds, which is Australia’s only listed agricultural REIT, owns land which it then leases to operators, with the arrangement providing a stable revenue stream that supports regular distributions to investors.

In a statement to the ASX, Rural Funds rejected both Bucephalus and Bonitas’ claims as “false, misleading and speculative without any inquiry being made of [Rural Funds] before their release”.

“Rural Funds Management encourages its investors to consider carefully the full rebuttal of these claims [w]hich has been corroborated by EY And the fulsome audit reports of the group by its auditors, PwC.”

The group’s shares lifted after its response on Monday, closing out at $1.68.

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