| 2018-07-12 09:49:13|
FPI 09:49 07/12 07/12/18
Farmland Partners bounces after analysts, company push back on short report
Shares of Farmland Partners (FPI), a real estate company that owns and seeks to acquire farmland throughout North America, jumped in early trading after the company responded to allegations from a short-seller that sent shares lower by nearly 40% on Wednesday. BACKGROUND: On Wednesday, Seeking Alpha contributor "Rota Fortunae" said in a post on the financial-focused website that the company's loans to related-party tenants introduce "significant risk of insolvency." Fortunae, who called the stock "uninvestible," claimed that the company has "neglected to disclose that the majority of its loans have been made to two members of the management team, including Jesse Hough, CEO Paul Pittman's long-time business partner." FARMLAND DENIES ALLEGATIONS: Farmland Partners took to defending itself on Wednesday, saying in a statement that Fortunae's allegations are "false" and "unfounded." While the company said it will issue a more detailed response in the coming days, Farmland said that the loans in question were about 1% of its revenue, adding that "None of the borrowers under the program as of March 31, 2018 were related parties, or have other business relationships with the company, other than as borrowers and, in some cases, tenants." CEO Pittman, commenting on the claims, said "It is horrifying the amount of damage that this self-interested, anonymous party's false allegations caused today to the company's stockholders," adding that the company is "evaluating what avenues are available to the company and its stockholders to remedy the damage inflicted." Additionally, Pittman told Reuters that "We're not near insolvent. We're not overpaid. Our properties are valuable... Our rents are in fact going up." ANALYST DEFENSE: Two analysts this morning jumped to the defense of Farmland Partners, with B. Riley FBR upgrading shares to Buy and Baird calling the stock a "Fresh Pick." In a research note, B. Riley FBR analyst Craig Kucera cited valuation, telling investors that the Seeking Alpha article had "questionable" valuation assumptions and "nonexistent, in our view" concerns about solvency. Meanwhile, Baird analyst David Rodgers said the reaction in shares yesterday, aside from new-found shorts, reflects "the ongoing frustration of longer-term investors at a company that has been unable to deliver on a promise of delivering farmland returns to public investors." However, Rodgers said he believes the negative Seeking Alpha article raised questions about Farmland's loan program and valuation, "but may reach too far." PRICE ACTION: In early trading, shares of Farmland Partners are up 17% to $6.18.
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