Bonitas Research chickens out of facing Rural Funds in Australian court

Rural Funds Group (ASX: RFF) is still under pressure.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Overnight U.S. activist short seller Bonitas Research made public a letter to the lawyers of Rural Funds Group (ASX: RFF) in which it outlined its intention to wriggle out of having to defend RFF's action for damages in an Australian court room. 

The agricultural REIT is seeking financial compensation from Bonitas for costs it claims resulted from Bonitas's false and misleading allegations. For example if victorious it could seek to recover the costs of hiring auditor Ernst & Young to investigate the allegations, or other costs incurred as a result of defending itself from the allegations.

According to Bonitas's letter "Australian courts have no jurisdiction" over it, as it does not conduct business in Australia and it will "contest the enforcement of any orders or judgements" RFF does obtain in Australia.

In other words even if an Australian court did ever order Bonitas to pay any damages it would refuse on jurisdictional grounds.

Bonitas even threatened to commence a "defamation" action of its own against RFF in US courts. It claimed US courts had jurisdiction as US investors own large amounts of RFF shares. 

Evidently Bonitas has almost nothing to gain from defending the Australian court action, while its own threat of legal action in the U.S. against RFF comes across as lame bluster for show. 

Since a second Hong Kong-based short selling research group named Bucephalus also attacked RFF with similar allegations about the conflicted incentive structure, related party transactions, asset valuations, and funding cover of dividends the stock has fallen 19% over the last month. 

RFF's management also took an unusual approach of refusing to knock back the allegations in detail themselves, but instead told investors to rely on PWC's audit of its accounts and the audit it commissioned E&Y to complete looking at the allegations.

It's possible to draw different conclusions why management took this approach.

For its part RFF's management team continues to dismiss all the allegations as self-serving, unfounded, rubbish. 

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 owns shares of and has recommended RURALFUNDS STAPLED. 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.

More on Share Market News

Person pretends to types on laptop drawn in sand.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a miserly session for investors today.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Opinions

Too high? These 2 ASX shares might be due for a correction

These popular blue chips are looking dicey to me.

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Broker Notes

These ASX 200 shares could rise 20% to 35%

These shares are being tipped to deliver market-beating returns by analysts.

Read more »

Keyboard button with the word sell on it.
Broker Notes

8 ASX All Ords stocks downgraded to sell ratings

Find out which shares are out of favour with the experts.

Read more »

Woman smiling whilst shopping in a clothing store.
Dividend Investing

Why this quality ASX 300 dividend stock is tipped to surge 54%

A leading fund manager forecasts significant outperformance from this quality ASX 300 dividend stock.

Read more »

A group of businesspeople clapping.
Broker Notes

Bell Potter names more of the best ASX 200 stocks to buy in June

These stocks could be best buys this month according to the broker.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Market News

Why Clarity, Coronado Global, Iperionx, and Lynas shares are roaring higher today

These shares are having a strong session on Thursday. Why are investors buying them?

Read more »

A woman looks questioning as she puts a coin into a piggy bank.
Opinions

The ASX 200 is approaching its all-time high. Here's why I'm not buying shares

I'm not seeing what the broader market is.

Read more »