Blue Sky Alternative Investments Ltd (ASX: BLA) shares fell as much as 17% on Monday after the wealth management business announced sweeping changes to its management team and business model.
Blue Sky is an ‘alternative’ funds management company, meaning it goes beyond traditional investments like shares, cash and bonds. For example, it has agricultural investments.
What’s Going On With Blue Sky?
In late March, Blue Sky found itself the target of a notable short-seller investment firm which alleged Blue Sky was overstating the size of its investments, its fees and performance. Glaucus Research Group produced the report. As a ‘short seller’, it makes money when share prices fall.
According to Yahoo! Finance, Blue sky Shares were trading over $10 before the Glaucus report was released. Today they are trading at $2.50.
Initially, Blue Sky rebutted many of Glaucus’ claims.
Blue Sky said Glaucus’ report, “includes analysis of the financial position and performance of Blue Sky and its investments that is fundamentally flawed and inconsistent with market practice.”
Despite that, a few weeks later, Blue Sky’s CEO Robert Shand resigned and the reigns were taken up by Kim Morison.
John Kain, Blue Sky’s Chairman, said: “In offering his resignation, Robert agreed that as Blue Sky rebuilds market confidence, it was in the best interests of the company, its shareholders and its investors for Kim to take over as interim Managing Director.”
Blue Sky Board Out
This morning Blue Sky went another step and announced that Mr Kain and the board of directors will resign, subject to new appointments. In addition, Blue Sky has withdrawn its profit guidance for its 2018 and 2019 financial years and will restructure its business model.
“The Board is examining proposed changes to the Blue Sky business model and management structure, to prioritise Blue Sky’s areas of competitive strength and to better align Blue Sky’s fixed cost base with recurring management fee revenue,” Morison said.
“There will also be changes to board composition and disclosure framework to promote greater independence and further improve communication.”
Going forward further detail will be provided to shareholders and investors with regards to Blue Sky’s performance, its fees and the size of the pool of money it invests for clients (known as ‘fee earning assets’).
“It is intended that this information will be updated and released half-yearly at financial reporting dates,” Morison added. “Certain information will need to be aggregated or disclosed in ranges, given commercial sensitivity and confidentiality undertakings to investors.”
Outlook
Looking ahead, Blue Sky said near-term uncertainty resulted in it withdrawing its profit forecasts but expects its management fees will be able to cover its operating costs from 2019. It expects to earn other fees on top of this.
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