I have been trolling the internet for information on Blue Sky Alternative Investments and its 95% drop in share price. Here are the two sides of the story.
1. “Blue Sky Wildly Exaggerates its Reported Fee Earning AUM.” Glaucus
"A detailed breakdown of our FEAUM was given on 7 May 2018. That breakdown clearly explains the composition of FEAUM as being $4 billion at 31 March 2018" Blue Sky
2. “Evidence that Blue Sky misrepresents the performance of its investments.” Glaucus
"over the five years to 31 October 2018, we have realised a total of 35 assets, with an equity return to our investor clients of 17.9% per annum net of fees. Of these 35 assets 27 have been realised at or above their carrying value" Blue Sky
3. “Blue Sky Gouges Australian Investors with Extortionate Fees.” Glaucus"All Blue Sky fees are fully disclosed to, and accepted by, investor clients." Blue Sky
"Private Equity team exited four investments during FY17, delivering the following returns to investors:
HPS, which delivered investors a 2.0x return on invested capital (net of fees);
Oaktree, which delivered investors a 1.9x return on invested capital (net of fees);
Milk, which delivered investors a 1.2x return on invested capital (net of fees); and
Pet Circle, which delivered investors a 1.7x return on invested capital (net of fees)" Blue Sky
4." Glaucus says its believes Blue Sky has been overstating its financial performance by aggressively marking up the value of its unrealised investments."
Glaucus says Blue Sky over values its fund holding in a Mexican takeout joint called Beach Burrito and then extrapolates that to the rest of the business.
From The Australian Finacial Review 9th April 2018 by Johnathan Shapiro
"Most documents say Blue Sky funds own 33 per cent, which led Glaucus to erroneously calculate a value of $62 million, using Blue Sky's venture capital fund marketing material.
But in Blue Sky's take-down of Glaucus' original allegations it ambiguously stated that the carrying value was "less than $20 million (for 100 per cent of the equity)."
When The Australian Financial Review sought to clarify, Blue Sky initially confirmed that its funds owned a one-third stake, but on further clarification it appears it does own 100 per cent.
So how did Glaucus, and others, make such a "grossly inaccurate" mistake?Well, Blue Sky has two investments in Beach Burrito – Beach Burrito Company 1, which invested in 2006 – and Beach Burrito Company 2, which invested $3.1 million ($2.75 million after $368,000 of fees) in November 2012."
Disclosure: I am/we are long BSKIF.