Wall Street-linked funds are focusing on ASX businesses that rely heavily on future promises rather than current profits at a time when some parts of the market look richly priced. Activist short sellers have been relatively quiet in Australia in recent years, in part because of strict defamation rules and tighter guidance from the corporate regulator, but the latest wave of reports suggests the ASX still looks attractive to offshore hedge funds searching for questionable valuations and weak disclosure.
In recent weeks multiple US-based research outfits have released lengthy reports on ASX-listed names across uranium, defence and advanced materials. One uranium developer, now valued at around $9.5 billion and recently promoted to a major index after its share price doubled from its April lows, is accused of inflating the value of its flagship Canadian project by more than 60% and overstating a forecast of nearly 30 million pounds in peak annual production. Another target, a defence and space contractor whose shares surged more than 600% last year as investors chased defence exposure, is under fire over a US$80 million contract with a little-known Korean buyer. A hedge fund says this buyer lacks the capacity to support such a large deal, which triggered a trading halt after the stock fell about 16%. A third company, a titanium technology hopeful that has benefited from US policy support for critical minerals, has seen short interest climb from about 6% to nearly 8% of its shares on issue after a New York fund questioned whether its process can be commercialised and raised concerns about its financial reporting.
This renewed burst of activist shorting could reshape how local investors assess risk in speculative sectors such as mining exploration, defence contracts and early-stage technology. Hedge funds argue they act as informal watchdogs and challenge aggressive forecasts and hype-driven valuations, but their campaigns can amplify volatility and dent confidence and may punish companies that are simply early in their development. With the regulator already trying to curb overly emotive research and defamation laws still looming in the background, the tug-of-war between activist short sellers and growth-focused ASX companies is likely to intensify while profitless or promotional stocks trade on elevated expectations.
