In an opinion article published in today’s AFR, corporate and M&A partner Jeremy Lanzer explains how the conviction of prominent American short seller Andrew Left exposes serious gaps in Australia’s response to occurrences of “short-and-distort” activism.
“The lesson is not that short selling should be banned,” he writes, “But the US verdict has sent an important message: market commentary is not immune from fraud law simply because it is packaged as research.”
Australia should be mindful because the playbook is familiar.
“An activist short seller, or sometimes an undisclosed associate standing behind the published researcher, builds a position designed to profit from a falling share price. A damaging report is then released, during trading hours, using selective and inflammatory language to create an immediate impact. The target scrambles for a trading halt, crisis advisers, board approval and a carefully verified response to be scrutinised by regulators and investors. Shareholders trade in the fog while the short seller is already covering the position before the market has heard the other side.”
Jeremy cites a number of examples, including that of Rural Funds Group, which was targeted by Texas-based Bonitas Research in 2019. Bonitas was later found by the NSW Supreme Court to have made false and misleading statements about the company but the damage was already done.
“That should have been a watershed moment for Australian markets. Instead, it exposed the weakness of the Australian response.”
To read the full article, click here.
