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Under-fire Blue Sky Alternative Investments (ASX: BLA) has downgraded its full year guidance along with its assets under management (AUM) as it announces an independent review of its business processes and financial reporting.
The Brisbane-based company's share price has plunged a further 20 per cent in early trade to $4.12 as it deals with the fallout from an attack by short seller Glaucus Research which last month released a negative report on Blue Sky.
Glaucus alleged Blue Sky had "wildly exaggerated" its AUM and said its correct share price valuation was around $2.56. That report has sent Blue Sky's share price plummeting more than 60 per cent from $11.43 on March 27 to $4.12 at around 12.30pm.
Blue Sky has revised its fee-earning AUM guidance for FY18 from $4.25 to $4.75 billion to $4.0 to $4.25 billion and underlying net profit after tax guidance from $34 to $36 million to $20 to $25 million.
"The revision to fee earning AUM and underlying NPAT guidance is based on the expectation the company will now be constrained from completing new investments outside of unallocated institutional mandates," Blue Sky chairman John Kain says.
"2HFY18 earnings will also be impacted by unbudgeted costs associated with the response to recent market events, including the costs of the upcoming independent review."
Kain says the review was commissioned to ensure the company was meeting market expectations around transparency and disclosure.
"We have listened to the market feedback and it is clear that Blue Sky has fallen short of market and shareholder expectations around transparency and disclosure.
"We are committed to making changes which will improve the business, provide greater transparency and improve shareholder value over the long term.
"As part of this, the Board is committed to an independent review which will examine Blue Sky's risk management framework, its valuation processes, financial reporting processes and other disclosures," Kain says.
"We will update shareholders in due course on progress of the review and the expected date of completion."
Blue Sky says it has also reaffirmed its commitment to strengthening governance and will prioritise an earlier undertaking to form a board comprised of majority independent directors.
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