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Short-seller Glaucus Research has turned up the heat on Quintis, rebuffing a response from the Australian sandalwood producer and declaring it had “little confidence” in the ability of the recently departed founder to drive a successful takeover approach for the company.

In a follow-up note today, California-based Glaucus labelled subsequent responses by Quintis to the short-seller’s initial note last week as “wholly inadequate”.

Moody’s Investors Services yesterday cut Quintis’s credit rating outlook to “negative” from “stable”, saying its high leverage meant it had limited ability to “manage any unforeseen events”. The agency maintained its “B2″ rating on the company.

Glaucus said this, as well as a weak response from the company and the curious resignation of founder and managing director Frank Wilson “increase our conviction in our investment opinion” that the company is worth zero.

Quintis, previously known as TFS Corporation, came under fire last week when the California-based short-seller said in a report it believed the company would follow two other Australian plantation companies into administration and that its shares were worth zero.

Shares were on track to close 9.6 per cent lower on the ASX and had been down as much as 10.4 per cent.

Having dismissed the claims in Glaucus’s report last Thursday, Quintis doubled down and on Monday revealed via a statement to the Australia Stock Exchange the names of its biggest sandalwood oil and wood customers as well as revised financial metrics.

But hours after these new details, Quintis advised the ASX that Frank Wilson, the company’s founder and managing director, had resigned late in the afternoon to pursue a takeover of the company with an unnamed partner. Quintis said it was not aware of the identity of the unnamed international corporation and had not received any formal or informal takeover proposal.

Glaucus used its note today to draw a parallel with SurfStitch, an Australian retailer whose shares plunged in February last year when it missed earnings guidance, and whose founder resigned shortly after and said he was pursuing a buyout of the company in conjunction with private equity investors. That provided a short-term fillip for the share price, but no bid from the founder ever materialised. SurfStich is worth about one twelfth of what it was worth 13 months ago.

Quintis’s Monday follow-up explanation also revealed that its biggest customer in China, Shanghai Richer Link, has yet to order any shipments from the company so far this year. Quintis also acknowledged officials from Shanghai Richer Link had been questioned by Chinese authorities amid a broader investigation into sandalwood smuggling, but had been informed no charges had been laid against those officials.

Quintis has yet to file a follow-up response to Glaucus’s note today.

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