One to watch: Glaucus vs. Blue Sky

There’s a battle brewing in Australia that deserves everyones’ attention – if for nothing else because it pits one alternative asset manager against another.


On March 28, short-seller Glaucus Research published an extensive¬†report on Australian asset manager Blue Sky¬†Alternative Investments Ltd (ASX: BLA), which has interests in private equity, real estate, private debt and real assets. The main thrust of the report accuses Blue Sky of marking up the value of the private companies and other assets in its portfolios and thus inflating the value of its fee-generating assets under management – the key to how it’s profits. Glaucus says they’re inflating them by more than 60%.

Blue Sky claims the Galucus report is all a bunch of horseshit drummed up by a “foreign activist short seller” looking to make a quick buck off of the stock drop. Nothing to see here. Blue Sky’s Managing Director Rob Shand even penned a letter to shareholders promising better communication with them and rejecting all of Glaucus’ claims. The stock has still fallen by over half.

Jonathan Shapiro, a columnist with The Australian Financial Review, wrote that Shand and Blue Sky really dropped the ball by not taking any questions on the initial conference call with investors after the Glaucus report. Shapiro called it “a stunning error of judgement.” Shand also asked regulators to probe Glaucus for market manipulation – a common tactic among activist short seller neophytes.

At it’s heart, this is a PR battle the will come down to how much Blue Sky discloses about its underlying funds and private investments. Investors are demanding transparency and the onus is on Shand to come up with something more than platitudes to blunt his critics. Glaucus probably won’t go away.