• Viceroy has fired back after a damaging research report about it was released earlier on Thursday.
  • The firm denied that it gets paid for its negative reports about companies such as Capitec.
  • But it did not confirm how it earns its money. 

Followi­­ng the publication of a 49-page research report accusing it of plagiarism and manipulating markets, Viceroy responded with a one-pager of its own on Thursday, claiming some of the criticism is “ridiculous”.

Viceroy, a three-man outfit based in the UK and Australia, has caused major destruction in the local market. Last year, it released a report on Steinhoff which compounded a meltdown in the company, and its report on Capitec earlier this year caused the banking group to lose almost a quarter of its value.

Earlier on Thursday, SA research firm Intellidex published an extensive report about Viceroy, which was commissioned by Business Leadership SA. It pointed to a number of problems with Viceroy, including that it has no formal registration with any financial regulator.

See also: Bombshell report accuses Viceroy of plagiarising Steinhoff research

Viceroy did not dispute this, but said: “We are regulated, as is any other player in financial markets: any assertion otherwise is ridiculous.”

It furiously denied a number of allegations in the Intellidex report, but these questions remain:

1. How does Viceroy earn money?

The firm calls itself a “short activist”. It publishes research to show that a company is worth less than the market thinks. Before releasing its research, it takes a “short” position in the company’s shares, which means it will profit when the share price goes down.

Intellidex said that Viceroy may not be not trading for its own book; it couldn’t find any proof that the company has trading accounts. Instead, it speculated that Viceroy receives payments from other hedge funds and short sellers to publish negative reports.

This was hotly disputed in Viceroy’s one-page retort which followed a couple of hours after the Intellidex report. The firm says its work is “funded internally”. But it is still not clear how it earns its money.

Stuart Theobald, chairperson of Intellidex, told Business Insider SA that the research group stands by its report.

“Nothing in Viceroy’s response contradicts our arguments. We note in particular the lack of clarity about its business model.”

2. Did Viceroy steal information for its Steinhoff report?

The Intellidex report claims that Viceroy’s report on Steinhoff was “substantially plagiarised” from a report produced by a hedge fund six months earlier:

Comparing reports on Steinhoff: report from the hedge fund manager Portsea (green column) and Viceroy's report (blue column). Source: Intellidex

Viceroy didn’t address the plagiarism accusations directly, but did mention that it uses a network of industry consultants. It isn’t clear why the original source was not credited in its report.

3. Who is Viceroy exactly?

Its founder, Fraser Perring, was disbarred as a social worker in the UK four years ago for misconduct and dishonesty.

"The other members of Viceroy are two 24 year-old Australians, one of whom has a background in corporate restructuring, and the other has no known professional background. The three members have limited financial markets experience of no more than a few years each," Intellidex said.

In its response on Thursday, Viceroy did not dispute this.

Yet Intellidex described one of Viceroy's lesser-known reports as "a highly scientific inquiry" – which it does not believe was written by any of firm's three apparent members.

It is still not clear who the firm employs.

4. Who is its next target?

Viceroy says Intellidex’s report does not disprove any of its published work.

But the firm added that “to avoid any dispute on our next piece on a South Africa (sic) company, we have spent near 3 months back checking our data and analysis and will publish only when we are satisfied of its accuracy and validity.”­­

Earlier this year, Aspen fell almost 10% in a couple of hours following rumours that Viceroy was planning to release a report about the company. Blue Label Telecoms, and the property group Resilient, which has lost two-thirds of its value already in the past months, have also been named as possible targets.

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