June 23, 2021

By Lynda Kiernan-Stone, Global AgInvesting Media

It was back in July 2018 that an anonymous writer using the pen name Rota Fortunae – Latin for ‘wheel of fortune’ (later revealed to be Quinton Mathews) wrote a defamatory attack against Farmland Partners (FPI) which was published on the financial website Seeking Alpha. 

This “short and distort” scheme targeting FPI management and its stockholders was rife with false statements, according to Mathews own admission, that drove FPIs stock down by 39 percent on the day of publication – enabling Mathews and his clients, including his co-conspirators such as the hedge fund Sabrepoint Capital that focused his attention on FPI, to profit from their short positions established prior to publication.

Seeking Alpha representative Abby Estikangi-Carmel noted that following Mathews’ admission, the website removed all articles written by him, including the original piece attacking FPI, and blocked his account.

Most targets of such schemes will usually take the hit and regroup. However, after Farmland Partners lost as much as $115 million of its market value as a result of Mathew’s action, the firm pursued him in court. And, in a rare outcome,  to settle the lawsuit, Mathews agreed to pay FPI restitution equal to “a multiple” of the profits he’s gained since 2018.

“It’s highly unusual and refreshing to see a company take on this fight, because most will take the short term blow of the attack without pursuing legal vindication,” Jacob Fenkel, who has defended companies against accusations of stock manipulation, but was not involved in the FPI case, told Nasdaq.

FPI explained in a press release regarding the matter that it continues to pursue its claims in Texas federal court against Mathews’ co-conspirator Sabrepoint Capital, which worked with Mathews for months prior to the release of the article and paid him $100,000 for his work against FPI and other companies, saying it “will continue to vigorously defend the baseless lawsuits filed immediately after the article was published that piggybacked on statements Mr. Mathews now acknowledges were false.”

“With a stock price now more than double the closing price on July 11, 2018, it is clear investors already recognize that the Company was the victim of a short and distort scheme,” said Paul Pittman, CEO, FPI.

“The outrageous acts of Mr. Mathews and his co-conspirators, together with the blind and misguided trust Plaintiffs’ lawyers placed on Mr. Mathews’ statements, have damaged innocent shareholders,” continued Pittman. “We intend to continue to vigorously seek to right this wrong.  Plaintiffs who filed a lawsuit against FPI based on Mr. Mathews’ statements should acknowledge the falsity of the statements and rethink the ethics of continuing their cases, and move on from their frivolous pursuit of FPI stockholders’ money.”

It wasn’t until last year that Mathews revealed his identity, and those of his co-conspirators, after being compelled by a court order. He then went on to acknowledge that his statements published in July 2018, including unfounded claims that FPI manipulated its publicly filed financial statements, misstated cash flows, its ability to cover its dividend, faced insolvency, and failed to properly disclosed purported related party transactions in the company’s audited financial statements – were indeed false. 

“I regret any harm the article and its inaccuracies caused to Farmland Partners and any negative impact on Farmland Partners’ stock price at the time,” stated Mathews in a press release. 

The money being returned to FPI by Mathews includes not only the gains made through his trading, but also the profits realized by his business partner Keith Killing, and his father, who also shorted FPI prior to the article’s publication.

FPI is a real estate investment trust (REIT) that owns and seeks out high-quality farmland in North America, and makes loans to farmers secured by farm real estate. Currently, the company owns approximately 157,000 acres growing 26 crops across 16 U.S. states including Alabama, Arkansas, California, Colorado, Florida, Georgia, Illinois, Kansas, Louisiana, Michigan, Mississippi, Nebraska, North Carolina, South Carolina, South Dakota and Virginia, which are leased out to more than 100 tenants.

Although a rare outcome, this is not the only such case where an ag investor won in court against a short seller.

In February 2020 GAI News shared that the Supreme Court of New South Wales found in favor of publicly traded agricultural investor Rural Funds Management against U.S.-based activist short seller Bonitas Research, finding that claims made by Bonitas against Rural Funds were misleading and false. 

Founded by Matthew Weichert in Texas, Bonitas released a report in August 2019 claiming that Rural Funds has overstated the value of its portfolio by as much as 100 percent, alleging that the $1.2 billion Rural Funds portfolio of agricultural assets – including cattle holdings in Queensland, vineyards in South Australia and Victoria, macadamia orchards in Queensland, and cotton acreage in New South Wales – was worth a mere $268 million as of the end of 2018 – a breach of its $400 million net asset loan covenant.

The report also included caustic language referring to RFM as “worthless” and an “ASX listed fraud”. As a result, Rural Funds’ share price crashed by 43 percent, cutting its ASX market capitalization by approximately $335 million. 

The decision handed down by Judge David Hammerschlag against Bonitas was damning and clear.

Finding that Mr. Weichert and Bonitas violated sections 1041E, 1041F and 1041H of the Corporations Act, as well as section 12DA(1) of the ASIC Act, Judge Hammerschlag stated:

“Commencing at 9:23am on 6 August 2019, Bonitas and Wiechert engaged upon a concerted course of making statements and disseminating information scathingly critical of RFM and RFF,” said Justice Hammerschlag in the judgement.

“They accused RFM and RFF of dishonesty and of being a fraud. Their plain intention was to drive down the price of units for commercial gain.

“Statements which they made and information which they disseminated were false in material particulars and materially misleading. I am satisfied that they knew or ought reasonably to have known that the statements and information were false in material particulars or were materially misleading. They did not care that they were false.”

– Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Oilseed & Grain News. She can be reached at lkiernan@globalaginvesting.com.