The short-seller who brought down Blue Sky is back, and he’s after Seek
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Seek (ASX:SEK) shares are dropping today as Soren Aandahl, the short-seller who bought down Blue Sky is back and targeting the job vacancy platform.
In 2018, as head of research at short-seller Glaucus, Aandahl released a report about Blue Sky accusing it of exaggerating asset values. At Blue Sky’s Peak, it had a market capitalisation above $1 billion but fell into receivership in 2019.
Since than Aandahl began his own short-selling firm, Blue Orca Capital, and is now targeting Seek.
Blue Orca has now released two reports against Seek, the second of which was only released this morning and in response to a rebuttal from Seek.
Seek shares fell by as much as 7 per cent this morning.
Blue Orca is questioning if Zhaopin, a Chinese recruiting platform Seek owns 61 per cent of, is really the gem Seek claims it is.
The company first bought into Zhaopin in 2006 and owns 61 per cent today. Between 2014 and 2017 it was listed in its own right on the NYSE.
Seek claims that it accounts for 48 per cent of its revenues and was its segment to record revenue and profit growth.
But Blue Orca has labelled Zhaopin “rotten”, claiming the platform is inundated with fraudulent advertisements.
It claims to have contacted certain companies that have posted jobs and have been told the post were fraudulent.
Blue Orca also accused Seek of dangerous levels of debt and inflated profit figures. It said Seek was only worth $7.20 per share – approximately only a third of its current price.
This morning Seek told the ASX the short seller’s claims were unsubstantiated.
While it admitted fake advertisements and CVs can happen on online employment marketplaces, its assertions were exaggerated and misleading.
Seek said Zhaopin is in a net cash position of $222 million as at 30 June, up $44 million from 12 months prior, and the entire group had a track record of generating strong operating cash flows.
“We accept that market participants have different opinions, however this report is littered with inaccuracies,” said Seek CEO Andrew Bassat.
“We are well positioned for future growth and remain confident in SEEK’s long-term outlook.”
However Seek’s suggestion that it did “not wish to engage in detail” with allegations led to another Blue Orca report this morning.
Blue Orca claimed this was evidence it was right.
“In our opinion, Seek refuses to engage with our report because our evidence is compelling,” it said.
Seek said it would provide a formal trading update at its AGM later this month.