An independent investigation by EY into claims made by activist short seller Bonitas Research about Rural Funds Group has found them to be unsubstantiated. That conclusion has seen Rural Funds reach for its lawyers.

On 6 August 2019 Bonitas Research had selectively released a document about the financial position of Rural Funds Group. The claims were rejected by Rural Funds Management and an independent investigation conducted by EY has concluded that the assertions made ‘are not substantiated’. EY has further corroborated RFM’s initial response to Bonitas’ claims.

RFM has now instructed law firm Clayton Utz to begin proceedings against Bonitas Research for what it calls ‘deliberate and malicious publication’ which RFM claims ‘constitutes misleading and deceptive conduct in Australia’. The Australian Financial Review reports Rural Funds Group managing director David Bryant as saying he hoped to ‘send a message to anyone else that makes things up’.

Among the assertions made by Bonitas, that of fabricated rental income was, said EY, ‘not substantiated as the rent received and recognised in the financial statements agrees to the relevant accounting working papers, the executive rental agreements, invoices and amounts received’.

What Bonitas called the ‘largest nefarious transaction appeared as an undisclosed dividend recapitalization’ of RFM’s newly acquired cattle asset, J&F Australia, which included a A$30m special cash dividend. Again, EY noted that this allegation ‘is not substantiated as the A$30m payment was in return for J&F’s buy-back of shares and equivalent to the amount that RFM outlaid in its acquisition of the shares in J&F.

In fact, EY’s report finds none of the claims made by Bonitas to be substantiated. Published alongside the EY report, Rural Fund Group reported annual results to 30 June 2019, showing an 11.6 per cent increase in net profit to A$33.6m.