Activist Short Sellers on the ASX: The Major Campaigns and What Happened Next

Activist Short Sellers on the ASX

Most short selling is quiet. A fund forms a view, builds a position, waits, and says nothing. The position shows up in ASIC's aggregate data four business days later with no name attached, and the market never learns why.

Activist short selling inverts that. The position comes first, then a public report designed to move the price. The short seller is not waiting for the market to discover what they found; they are the discovery mechanism, and they profit from the reaction.

Australia has enough of a record to be worth reading carefully: a regulator's information sheet written specifically about these campaigns, a Supreme Court judgment finding a short report misleading, and companies that were vindicated alongside companies that collapsed within eighteen months. It does not support a simple verdict in either direction.

What separates activist shorting from ordinary shorting

ASIC's definition is the useful one. Activist short selling involves taking a short position in a financial product and then publicly disseminating information, directly or through an agent, to negatively impact the price of that product. That publication is the "short report".

Three features distinguish it from the institutional shorting that fills the reported data.

The publication is the strategy. A conventional short bets the market will eventually reach the same conclusion you did. An activist short bets you can cause it to, now. The report is not commentary on the position; it is the mechanism.

The conflict is disclosed and total. Activist short sellers routinely state that they are short and stand to gain if the price falls. That disclosure is a strength relative to anonymous rumour, and also the entire problem, because the author has a direct interest in the reaction being large.

The claims are usually about integrity, not valuation. ASIC notes a short report may criticise an entity's finances, management, public disclosures or future prospects, and need not be a formal document; a social media post, blog or forum can serve.

ASIC's research indicates campaigns skew to lower market capitalisations and to entities with complex or opaque structures, accounting practices or poor disclosure. Most campaigns against Australian entities have come from overseas short sellers, who often caveat their reports as not intended for an Australian audience even though online distribution means Australians read them widely. That caveat has been tested in court.

What ASIC's INFO 255 asks

ASIC published Information Sheet 255 Activist short selling campaigns in Australia on 1 June 2021, to be read alongside RG 196 Short selling. Its structure is notable: it sets out better practices for four groups, not just for short sellers.

For activist short sellers and report authors, ASIC recommends that short reports be released outside trading hours, be based on objective and verifiable information rather than imprecise or emotive language, and that authors check their facts with the target entity before publishing.

For target entities, it recommends seeking a temporary trading halt, creating time to digest the claims and respond comprehensively rather than reacting into a falling market.

For market operators, it recommends an immediate trading halt on becoming aware of a new short report with material price impact, requesting a detailed response from the target as soon as possible, and continuing to monitor for follow-up reports and possible listing rule breaches.

The information sheet also functions as a reminder that the market misconduct provisions in Part 7.10 of the Corporations Act apply. The s1041 series covers market manipulation, false or misleading statements about financial products, dishonest conduct, and inducing others to deal. ASIC's stated priorities during a campaign are to protect investors, protect the integrity of the market for the target's securities, and ensure the market is informed.

Glaucus and Quintis, 2017

Glaucus Research published its report on TFS Corporation on 21 March 2017, the same day the ASX-listed sandalwood grower rebranded itself as Quintis. Glaucus disclosed it was short and assigned the company a valuation of $0.00.

The report attacked the managed investment scheme model the business was built on, pointing to the collapse of earlier listed agricultural MIS operators, and argued the company generated little cash from actual sandalwood sales while relying on capital raising to plant new vintages and service debt. Shares fell on the day, though not catastrophically at first. A second activist firm, Viceroy Research, published its own report in May 2017.

What followed was not driven by either report. In May 2017 the company disclosed that a contract with a Nestlé-owned counterparty had been cancelled without the board being made aware. Trading was suspended at the company's request and never resumed, the company defaulted in August 2017, and in January 2018 the directors appointed voluntary administrators. Shareholders were left with nothing (Motley Fool Australia, ABC News).

The sequencing is the point. The short report did not destroy Quintis; it preceded, by two months, a disclosure failure the company itself made. Whether it caused investors to look harder at what followed is unknowable, and that is exactly the question the price-discovery argument turns on.

Glaucus and Blue Sky, 2018

Glaucus published on Blue Sky Alternative Investments on 27 March 2018, accusing the fund manager of grossly exaggerating its fee-earning assets under management, misrepresenting investment performance, and collecting fees beyond its entitlements. It put real fee-earning assets under management at a maximum of about A$1.5 billion against the A$3.9 billion reported, and argued the shares were worth $2.66 against a market price above $10.

Blue Sky went into a trading halt. Its response leaned on calling for an ASIC investigation and questioning Glaucus's integrity rather than rebutting the claims with evidence, which did not help sentiment. The stock fell 18% on resumption, was down 41% by early April, and went into receivership in May 2019, roughly fourteen months after the report (ABC News, Business News Australia).

Two facts from the aftermath matter. ASIC, responding to Blue Sky's complaint, reportedly found no potential false or misleading statements in the Glaucus report and no apparent short-selling misconduct. And the class actions that followed did not allege the report was false; they alleged Blue Sky, its directors and its auditors had overstated assets under management, revenue, receivables, profits and asset values.

That is about as close as the Australian record gets to a clean vindication of an activist short. Glaucus itself, a two-person research shop, has since disbanded.

Bonitas and Rural Funds, 2019, and the court case

The Rural Funds campaign is the most consequential of the Australian cases, because it is the only one that produced a judgment.

In August 2019, Bonitas Research published tweets and a report on Rural Funds Management, the responsible entity for ASX-listed RFF, describing it as an "ASX listed fraud" and "worthless" and alleging the true net asset value of its $1.2 billion portfolio was closer to $268 million. Bonitas disclosed it was short. The unit price fell more than 40% on the day.

Rural Funds sued. In Rural Funds Management Limited v Bonitas Research LLC [2020] NSWSC 61, handed down in February 2020, Hammerschlag J of the NSW Supreme Court (not the Federal Court, as it is sometimes reported) found for Rural Funds. The Court held that Bonitas and its principal Matthew Wiechert had made statements that were "false in material particulars" and materially misleading, that they knew or ought reasonably to have known this, and that "they did not care that they were false". The conduct contravened ss 1041E, 1041F and 1041H of the Corporations Act and s 12DA(1) of the ASIC Act. Rural Funds failed on one limb, s 1041D, which the judge held concerns dissemination about illegal transactions previously carried out by the disseminator (Herbert Smith Freehills, MinterEllison).

The Court also rejected the jurisdictional defence. Bonitas and Wiechert argued Australian courts had no reach over Texas-based parties; Hammerschlag J held that Australia was an intended destination for the statements, that they reached and were read here, and that both Acts reach the conduct.

Then the practical limits appeared. Damages were assessed at $530,201, plus costs of $368,974, on the footing that they did not include the profits Bonitas made from the contravention. Bonitas maintained Australian courts had no jurisdiction over it, said it would contest enforcement, defended its research, confirmed it had maintained its short position, and called the judgment "procedurally and substantially infirm".

The case establishes both things at once: Australian law reaches an offshore short report aimed at Australian investors, and the remedy may be a modest award that then has to be enforced overseas against a party disputing the whole exercise. INFO 255 arrived sixteen months later.

VGI and Corporate Travel Management, 2018 onward

Not every campaign is offshore, and not every one resolves quickly.

In October 2018, Australian fund manager VGI Partners published a 176-page presentation on Corporate Travel Management (CTD), raising twenty concerns focused on accounting processes and cash flow, and disclosing a short position of over two million shares. The stock entered a trading halt, fell almost 30% on resumption and settled more than 20% lower. CTD rejected the bulk of the claims, saying VGI "either misunderstands or misrepresents" its financial performance, governance and business model.

VGI published a 52-page follow-up in early November. CTD took a second trading halt, said the follow-up raised no substantive new issues, and engaged EY to assess certain matters relating to its FY2018 financial statements. Between the first report and the second halt the share price fell from $27.64 to a low of $19.20 (Motley Fool Australia, Business Insider Australia).

CTD is useful precisely because it did not resolve into a clean answer. The company continued trading and the campaign faded from headlines without either vindicating or discrediting the short seller. That is the most common outcome, and the one nobody writes retrospectives about.

Reading short interest around a campaign

ASIC publishes aggregate reported short positions per security on a T+4 basis. A short report typically lands before market open or over a weekend, and the price reaction is immediate, but the published short interest for that day does not appear for four business days and describes positioning as at the report date, not after it. Any chart overlaying "short interest" on "day of report" is aligning two series measured at different times unless the lag has been handled explicitly.

With that respected, the data can show the build before publication, since an activist position must exist beforehand and appears in the aggregate if it is large enough to be reportable; whether other funds joined, visible as short interest that keeps rising for weeks afterwards; and the exit, as the aggregate falls when positions close. Bonitas is a documented exception, having confirmed it maintained its position after judgment.

What it cannot show is who holds the position. ASIC's aggregated reports contain no short seller details, by design. You can see a security's reported short interest double; you cannot see that it was the report's author.

Campaigns are not predictable, but the conditions that attract them are visible, and so are the aftershocks. The most shorted list shows where reported short interest is concentrated now, and campaigns tend to arrive in names where a bearish view is already building rather than out of nowhere. Rising short interest surfaces securities where positioning is building quickly, though the overwhelming majority of that has no campaign behind it. Battlegrounds shows where short conviction and buying pressure are actively colliding, the state a contested target ends up in after a report the company disputes. And high days to cover matters after a campaign rather than before: a crowded short in an illiquid name is where a successful rebuttal produces the most violent reaction. Individual stock pages carry the full reported series, including for past targets such as RFF and CTD.

The argument on both sides

The case for is that activist shorting funds adversarial research nobody else pays for. Sell-side analysts are structurally reluctant to publish sell ratings, auditors are engaged by the company, and regulators are resource-constrained and reactive. Blue Sky carries this argument: ASIC found no misconduct in the report, and the litigation that followed targeted the company's own disclosures rather than the short seller's claims.

The case against is that the same incentive rewards exaggeration. The profit comes from the size of the price reaction, not the accuracy of the analysis, and those are not the same objective. A report published into an illiquid open, with emotive framing and no prior enquiry of the target, can move a price 40% in a session in a way that is very hard to undo even if the claims are later found wanting. Rural Funds carries this argument, and the Court's finding that the authors "did not care" whether the statements were true is the sharpest statement of the concern available.

ASIC's position is neither. Covered short selling is a legitimate mechanism for price discovery and liquidity, and INFO 255 does not try to suppress campaigns; it sets expectations about how they are conducted so the market ends up informed rather than merely moved. For a reader, the practical stance is to treat a short report as research from a party with a disclosed position: read the evidence rather than the adjectives, check whether the author contacted the company, note whether it was published into an open market, and wait for the response before concluding anything.

FAQ

What is an activist short seller?

Someone who takes a short position in a financial product and then publicly publishes information intended to push the price down, profiting from the reaction. ASIC calls the publication a "short report" and notes it need not be a formal document; a social media post or blog can qualify.

Is activist short selling legal in Australia?

Yes, where the underlying short selling is covered under the Corporations Act and the report does not contravene the market misconduct provisions. ASIC's INFO 255 sets out expected practices rather than prohibitions. Where a report is false or misleading, the s1041 series applies, as the Rural Funds case demonstrated.

What does ASIC's INFO 255 recommend?

For short sellers: release reports outside trading hours, base them on objective and verifiable information, avoid imprecise or emotive language, and check facts with the target beforehand. For targets: seek a temporary trading halt to respond properly. For market operators: halt trading on becoming aware of a materially price-moving short report and request a detailed response from the target.

Did Rural Funds win against Bonitas?

Yes on liability. In February 2020 the NSW Supreme Court found Bonitas and Matthew Wiechert had made statements that were false in material particulars and materially misleading, contravening ss 1041E, 1041F and 1041H of the Corporations Act and s 12DA(1) of the ASIC Act. Damages were $530,201 plus costs of $368,974, assessed without including the profits made from the contravention, and Bonitas indicated it would contest enforcement.

Was the Glaucus report on Blue Sky proven right?

Not in a courtroom, but the surrounding record leans that way. ASIC reportedly found no false or misleading statements in the Glaucus report and no apparent short-selling misconduct, Blue Sky went into receivership around fourteen months later, and the class actions that followed alleged overstatement by the company, its directors and its auditors rather than falsity by the short seller.

Can I see short interest before a short report is published?

Partly. Reportable short positions appear in ASIC's aggregate figures for a security, so a build ahead of publication is visible in hindsight. The data is published on a T+4 basis and is anonymised, so you cannot identify who holds the position or read it in real time.

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Next: see current positioning on the most shorted ASX stocks list, track where short interest is building with the rising short interest scan, or read the regulatory background in ASIC's short selling regulations and ASX short selling history.

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This content is for informational purposes only and does not constitute financial or legal advice. Descriptions of campaigns, court proceedings and regulatory guidance are drawn from the linked public sources and reflect the position as reported at the time; they are historical accounts, not assessments of any company or firm's current standing. Nothing here endorses or criticises any named party. Short-position data referenced on this site is derived from ASIC publications on a T+4 basis. Always conduct your own research before making investment decisions.