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Electro Optic Systems (ASX:EOS) has responded to a short-selling outfit called Grizzly Research that last week claimed the Australian company is acting fraudulently, which helped crystallise a YTD loss of over -36%.
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I covered that report on last week’s HotCopper Highlights; in a sentence, Grizzly allege EOS has been dishonest to its investors about the true nature of an unnamed Korean client it inked a contract with last year.
(To add another, Grizzly allege that the Korean partner is a small agritech firm called Goldrone unable to pay the price of the contract.)
After that Grizzly report, on Friday alone, shares slumped -16%.
Now, we’ve got a reply from EOS, and the response is strong to say the least.
“EOS rejects the misleading, manipulatory and pejorative conclusions contained in the Grizzly Report… published by a prolific short seller without any prior enquiry of EOS,” the company wrote on Tuesday.
“EOS understands Grizzly has been the subject of legal action, including defamation suits… over allegations deemed false and harmful by [other] companies.”
In short, they’re going to court. The company reported it’s already got heads at home and in Germany working to figure this out. Anyone who remembers the Vulcan Energy and J Capital saga may be seeing some parallels here.
(If Grizzly is found to be defamatory, it would be another short-selling firm that didn’t fairly estimate the strength of Australia’s defamation laws.)
When it comes to Electro Optic’s replies to some of Grizzly’s specific allegations, EOS wrote on Tuesday that: The address of a Goldrone office provided by Grizzly no longer houses that company; that the Korean contract was not included in the order book; that EOS never said it was ultimately binding, and, then finally, in the same response, that Goldrone “believe they can source customer funding.”
EOS last traded at $6/sh before halting on the Grizzly report.
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