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Farmland Partners - >>> Denver company wins court victory over 'short-and-distort scheme' against its stock

A ruling may end a yearslong legal fight over a short seller's report, a 40% stock drop and lawsuit.


By Greg Avery

Denver Business Journal

Apr 8, 2022


https://www.bizjournals.com/denver/news/2022/04/08/farmland-partners-short-seller-lawsuit-victory.html?ana=yahoo


A Denver company won dismissal of a class-action lawsuit this week after a court concluded the company and its executives had been the victim of false claims motivated by short-selling the company’s stock.


Farmland Partners Inc. (NYSE: FPI) won a summary judgment in U.S. federal court in Denver, ending a 2018 class-action lawsuit shareholders had brought against the company and two of its founding executives after its stock price plummeted in 2018 following the publication of a short seller’s article that has since shown to be false.

“After nearly four years, this judgment on the merits should finally slam the door on the baseless attacks against our company, its leadership, and most importantly its shareholders,” said Paul Pittman, FPI chairman and CEO, in a statement that labeled the incident a “short-and-distort scheme."

Pittman, who founded FPI, was named a defendant in the shareholder lawsuit alongside the company and Chief Financial Officer Luca Fabbri.

Farmland Partners is a real estate investment trust that focuses on agricultural land, owning property worth more than $1.1 billion.

The 25-employee company owns 187,000 acres in 19 states, generating money from the lease payments of tenant farmers working the land. It also owns a couple of small cattle feedlots, a farm auction business and lends money to finance farm operations.

In 2018, a short seller's report, published on the website Seeking Alpha under the pseudonym Rota Fortunae, alleged the Farmland Partners loan program included lending to people who were not third-party borrowers, suggesting parties related to the company had loaned money without proper disclosure and that FPI board members had quit, and the company’s accounting firm had resigned over it.

Information in the anonymous report was false, concluded the April 5 ruling by Judge David Ebel.

Two accounting firms had reviewed and approved of Farmland’s loan reporting, and Farmland Partners had itself switched accounting firms to save money; board departures had nothing to do with the loan program, the ruling summarized.

But readers of the anonymous 2018 report wouldn’t know that, and Farmland Partners stock dropped 40% after its publication.

“The author also stated that he and his clients — particularly a hedge fund called Sabrepoint Capital — shorted Farmland stock before the report was published and profited off the ensuing price drop,” the court judgment said.

Shareholders filed their class-action lawsuit against Farrnland the next month.

The court case over the stock’s drop dragged on, after even FPI identified the author of the report, David Quinton Matthews, and in 2021 he settled a lawsuit brought against him by FPI and published an article on Seeking Alpha admitting to the inaccuracies of his 2018 report.

Matthews, in last year’s retraction, said he was paid $100,000 by Sabre Point Capital to criticize companies the fund held short positions on, and that he also shorted companies’ stock. As part of the settlement with FPI, Matthews also pledged not to comment on FPI, its employees or its stock performance again.

“Even though we were successful in unmasking the perpetrators and the falsity of this blatantly manipulative scheme, we nevertheless have had to continue to defend the resulting class-action lawsuit at significant corporate expense,” Pittman said in his statement. “We are thankful that the court rightly ruled in our favor and put an end to this frivolous litigation and its continuing cost to our shareholders.”

FPI says it’s still pursuing litigation against Sabrepoint Capital over the article and short-selling.

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