Well-known Australian venture capitalist Elaine Stead has stepped down as a board member at Blue Sky Alternative Investments after a month of troubles for the investment firm following an extraordinary attack from US-based short-selling hedge fund Glaucus.
Fellow executive director Nicholas Dignam has also stepped back from a board position, but will remain involved in the business in an executive role, as will Stead. Meanwhile, Blue Sky managing director Robert Shand has resigned.
A report from Glaucus published in late March alleged that Blue Sky’s assets under management were valued at $1.5 billion, compared to the $4 billion Blue Sky itself values them at, and that Blue Sky misrepresents the performance of its investments. The short-seller recommended a share price of $2.66 — a 77% drop from the then price of $11.40.
Since then, Blue Sky’s shares have been placed in and out of voluntary suspension as the fund was forced to respond to the claims made by Glaucus, which it said had a “large number of factual inaccuracies throughout”. Currently, the company’s shares are trading at $3.24, a significant drop from its all-time high of $14.99.
“Blue Sky believes that the assertions made in the [Glaucus report] are incorrect, fundamentally flawed and materially misleading; and that these flaws call into question the research methods and accuracy of all claims throughout the [report],” the company said in a market update.
Glaucus fired back however, with Fairfax reporting earlier this month the short-seller said Blue Sky’s reply to its report “has fallen back on threats and recriminations”. Glaucus criticised the Aussie fund for not providing the market with more high-level disclosure around its portfolio.
“Time and again, Blue Sky insists that we are incorrect, without providing any substantive rebuttal, analysis or calculations showing why we are wrong. Rather, Blue Sky claims what we consider to be a fabricated obligation to maintain secrecy on all of its investments, its portfolio and its performance,” Glaucus wrote, reports Fairfax.
On April 16, Blue Sky announced it was commissioning an independent review of its business processes. However, that was not enough for critical investors, with Shand resigning, and Stead and Dignam stepping down as board members. Kim Morison has been appointed as interim managing director.
This also follows attacks on Stead by market commentators, who called Stead’s regular Twitter commentary on all things politics, #startupaus, and her own personal life and wellbeing (all unsurprising additions to a modern day Twitter account) “fridge magnet banalities”.
Blue Sky Chairman John Kain said in a market update Stead and Dignam had made “significant contributions as directors and they will continue to concentrate on delivering strong investor returns and growing the business through their executive roles as Heads of Venture Capital and Growth Capital, respectively”.