Swedish industrial technology group Hexagon has moved to dismiss allegations of fraud and inflated margin numbers leveled against it by Fraser Perring’s short outfit Viceroy Research.
Two weeks ago, Viceroy alleged that Hexagon’s top managers had front-run company investments through a vehicle called Greenbridge, which was founded by Ola Rollén, Hexagon’s current chairman and former CEO. The report also claimed that Hexagon employed overly aggressive accounting measures in order to boost margins and mask operational deficiencies.
Viceroy’s claims ‘‘are based on demonstratable factual inaccuracies, incorrect assumptions, and unfounded speculation,’’ fired back Hexagon in a 16-page rebuttal Wednesday.
The company rejected allegations that its investment in Divergent Technologies, the only one in which Greenbridge also invested, was a related party transaction under international financial reporting standards. Greenbridge had previously moved to clarify that it had invested in Divergent only after Hexagon made its own investment in the business, a claim rehashed by Hexagon in its Wednesday response.
Hexagon also defended its organic and structural growth numbers as ‘‘appropriately recorded.’’ Viceroy argued the company’s reported organic growth figures in high-single digits over the last 25 years were the result of mischaracterization and ‘‘blatant’’ misreporting of its acquisition growth. It also said that a ‘‘vast number’’ of businesses bought by Hexagon were underperforming.
Hexagon shares were up 2.2% at 103 Swedish kronor each as of 1:22 p.m. in Tuesday trading in Stockholm. They were quoted just above 112 kronor apiece before Viceroy’s initial report. The short seller put a 50% downside target on the stock in a follow-up report last month after Hexagon published its results for the second quarter and unveiled a cost reduction plan, which Viceroy suggested was a reaction to part of its allegations.