TFS Corporation, now called Quintis, has continued to feel the fallout from a short seller’s report, which likened the sandalwood and cosmetics company to a Ponzi scheme and predicted its failure.
Shares in the company fell 7 per cent yesterday after the Glaucus Research Group released a 39-page report presenting a picture of misleading forecasts, dubious marketing materials and questionable customers.
The rout continued today, with the company’s shares hitting a three-year low of $1.055 before finding some buying support.
At the close, Quintis shares were still off 17.5¢, or 13.36 per cent, at $1.135.
The plunge prompted a share price query from the ASX, which prompted the company to acknowledge the Glaucus report and respond to the criticism.
Quintis described the report as self-serving and biased because was designed to drive the company’s share price lower for the authors’ financial gain.
“There are substantial and egregious inaccuracies littered throughout the note, which could have been avoided had the note’s author contacted the company,” Quintis said in a statement.
“TFS’s plantations and shares are owned by some of the largest and most respected institutional investors in the world, investments they made after undertaking considerable due diligence.
“TFS also has a strong track record of meeting its financial guidance and the company reaffirms its guidance that full-year 2017 cash EBITDA will increase by at least 25 per cent on full-year 2016.”
The report comes at an awkward time for TFS, which last night rebranded itself as Quintis in a star-studded launch in Melbourne attended by Australian formula one driver Daniel Ricciardo and former Australian test cricketer Adam Gilchrist.
TFS is the first Australian-listed company targeted by the activist firm Glaucus, which has courted controversy overseas.
The blistering 39-page report by research director Soren Aandahl gave TFS a valuation of zero.
“We believe that TFS will likely follow Timbercorp and Great Southern into ignominy and failure,” the report said.
“TFS’ model resembles such collapsed agricultural managed investment scheme companies and their Ponzi-like structure.
“TFS does not generate significant cash from sales of its sandalwood, which for the most part has yet to be harvested. Instead, TFS is reliant on raising capital to plant new vintages, operate its business, make payments on its ballooning debts and pay off earlier investors.”
Glaucus drew attention to a five-year deal with a Chinese buyer not identified by TFS in announcements to supply 150 tonnes of processed heartwood a year. It said the customer, named on TFS’ website only in Chinese, as Shanghai Richer Link, was a “tiny commodities importer with minimal operations and a small balance sheet”.
TFS said the report contained “substantial and egregious” inaccuracies, and omitted major customers such as a subsidiary of Nestle and European retail chain Lush Cosmetics.
“The report is a self-serving report by a shorter of the stock in an attempt to drive TFS’ share price down for their own financial gain,” it said.
“TFS’ plantations and shares are owned by some of the largest and most respected institutional investors in the world, investments they made after undertaking considerable due diligence.”