Pets at Home stock hit as it rejects short-seller claims

Shares of Wilmslow, Chesire-based pet and vet retailer Pets at Home Group Plc fell about 7% on Tuesday as it rejected claims by Austin, Texas-based activist short seller Bonitas Research that it was untruthful about £34 million in loans that Bonitas alleges “artificially inflated” its reported profits.

Bonitas claimed in a statement that Pets at Home “lied about GBP 34 million of undisclosed trading loans hidden from its balance sheet used to support circular payments from PETS Vet Group Joint Ventures (PETS JVs) which we believe artificially inflated PETS reported profits.”

Pets at Home said this was an historic issue that had been dealt with, stressing that the company had not been involved in any wrongdoing.

A Pets at Home spokesman said: “It refers to an historic view of operating loans to joint venture practices, first highlighted in the company’s 2017 annual report. 

“It has been addressed by the new management team who have taken considerable action to successfully recalibrate the vet business and put it on a firmer footing for the future.

“This has included simplifications to the fee structure between the joint venture practices and Pets at Home, buying out or closing specific joint venture practices and slowing the rollout of new practices.”

Analysts at broker Peel Hunt dismissed the short seller’s attack, writing: “The oldest bear story in town on PETS has re-emerged and the unjustified dent it has made in the shares is a buying opportunity.

“Clearly in FY18 the JV fee structure was inappropriate and the day-to-day performance of the vets wasn’t good enough.

“Over 50 have been bought in or closed since then and the fee structure and support mechanisms have improved, such that at the interims all the KVIs were moving the right way.

“There really is nothing to see here.

“Much more importantly, the imminent prelims are likely to impress (current trading will be at least ok), so we would take the opportunity that this ancient history rehash brings to Buy.”