February 5, 2018 / 8:47 AM / 4 months ago

IQE dismisses critical research by short-seller, shares fall

LONDON (Reuters) - IQE (IQE.L), a British semiconductor material maker whose technology is in Apple’s (AAPL.O) iPhone, said a critical analysis of its finances by ShadowFall, an investment fund manager that hold a short position in the stock, was “without merit”.

Shares in IQE, which have risen more than six-fold since mid-2016 as analysts bet the company could benefit from its relationship with Apple, fell more than 10 percent in early trading on Monday before clawing back some of the losses to trade down 3.5 percent.

ShadowFall Capital & Research, which says it uses publicly available information, published its note late on Friday.

It said it was concerned about two of IQE’s joint ventures and a series of related party transactions that it said appeared to be somewhat circular.

IQE said the allegations in the report were “without merit and provided a misleading analysis of the company’s financial position”.

    “The central thesis of this report is a fundamental misrepresentation of the profit and cash generation of IQE, especially with respect to the company’s joint venture agreements,” it said. 

    It reiterated its outlook from December, when it said it expected its full-year revenue to be ahead of market expectations and to be not less than 150 million pounds for the year to end-December.

    Analysts at Barclays said there was “neither news nor merit” in the ShadowFall report, and reiterated its “overweight” view.

    Short interest has risen more than tenfold from July to a high last week of 12.4 percent of the company’s shares, according to filings disclosed with UK regulator the Financial Conduct Authority.

    ShadowFall said it manages an investment fund which holds short positions in IQE.

    Reporting by Paul Sandle, editing by Louise Heavens

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