As Hedge Fund VGI Deepened Its Bets, Corporate Travel Management Went Into A Trading Halt

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Early this morning Corporate Travel Management Limited (ASX: CTD) announced a trading halt ahead of further 52-page report issued by the hedge fund VGI Partners last night.

In an announcement to Australian Securities Exchange, the company requested its securities to be placed into a trading halt from an immediate effect as the company needs time to review and respond to a further investors’ report issued by VGI Partners claiming that they have “serious additional concerns” for CTM.

As per the latest 52-page disclosure released by VGI Partners yesterday evening, hedge fund has increased its short position on CTM by 23% and now VGI is short 2,501,286 shares in Corporate Travel Management. 

The bets of going short on Corporate Travel Management started from last week when hedge fund VGI Partners first campaigned their short position on CTM supported by 176-page research report. Due to this CTD’s share price plunged over 27% to close at $20.050 on 31 October 2018. However, VGI’s devastating  report that had marked ‘20 red flag’ for investors’ notice was eventually demolished by the fact statement released by the Corporate Travel Management.

But last night, six days following the CTM’s response to VGI’s original report, the hedge fund VGI Partners published a further report claiming that they have increased their short position on CTM as they speculate CTM’s share price to be crashed on number of grounds including “supernormal profitability” exercised by the Corporate Travel. VGI also told investors that it has significant capacity to go further ‘short’ on CTM in the future.

Going short simply means selling the asset that you actually don’t own and then buying it at lower speculated prices to return them back to the lender. In this buy-sell transaction of borrowed assets, the short sellers make profit from the speculated price change difference.

The fund stated that 14-page response by Corporate Travel Management to its 156-page report has “failed to adequately address the substance of VGI’s report”. VGI stated that The Corporate Travel’s response has made efforts to question the analysis of the hedge fund and shift the narrative.

The fund added that now taking this path, Corporate Travel has given rise to serious additional concerns. In the latest 52-page report, VGI claimed that chairman Tony Bellas made “simply false” comments last week by saying Corporate Travel removed an old Glasgow office from its website in April.

Commenting on CTM reply statement that read they have 73 employees at its new Glasgow office, VGI stated that as on 2 November 2018, the fund observed around “20 employees”, “Where are the other 53 employees?”

While confronting on CTM’s response that a 9% decline in cash receipts last year was due to “timing”, VGI said that how can cash receipts decline -9 percent year-on-year in a period when reported revenue grew +14 percent year-on-year?

The fund concluded their report by expecting Corporate Travel to present a straightforward reply to its investors.

The trading halt in the securities of Corporate Travel Management is expected to remain in place until the earlier of 8 November 2018 or the release of company’s pending announcement.

CTD last traded at $20.00 market price.


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