VGI’s short position on travel specialist Corporate Travel Management (ASX: CTD) has been refuted by the fact statement released by CTM today.
As hedge fund VGI Partners started campaigning their short on CTM, the securities of travel management company went into the trading halt on Monday. VGI’s short position was supported by an extensive 176-page research report that claimed aggressive accounting following by CTM, its involvement in running ghost offices across Europe and America and inadequate accounting disclosures. The report distributed to VGI clients has presented ‘20 red flag’ because of which the hedge fund has gone short on Corporate Travel Management.
Following this, CTM voluntarily went into a trading halt to take a comprehensive review of the published report. The company stated that the halt was intended to keep its shareholders informed.
After completing the review of VGI report, CTM’s Board today informed that they acknowledge two issues, that includes updation of company’s website in relation to office location and the inaccurate use of term ‘patented’ for the company’s proprietary technology. But apart of these two issues the Board argued that the “rest of VGI’s report either misunderstands or misrepresents the Company’s financial performance”
CTM refuted VGI report on following points:
CTM claimed the change in policy had no material impact to FY18 earnings as stated in VGI report. The Company further rejected the claim that the growth of receivables in FY18 was a result of the change in revenue recognition policy. CTM stated rather it was primarily due to robust growth in Total Transaction Value (TTV) and differences in the timings of working capital cycle.
VGI’s claim that downtrend in CRM’s 2H18 cashflows reflects the weak revenue quality, was also demolished by Corporate Travel Management. To weigh its argument CTM stated that company has been consistently delivering around 100% cash conversion and the downward movement in cash payment just reflects the timing difference.
Further the management debunked the VGI’s 58-page allegation just dedicated to accusing the CTM’s global office footprint for being overstated. CTM stated that the company has a strategy to build scale through global footprints instead of going through a costly and less productive empire of small ‘bricks and mortar’ offices.
In this CTM’s response to VGI report, the Board stated that they have approached VGI partners seeking a meeting to explain the Company’s response and ask that the report be corrected or withdrawn.
Chairman, Tony Bellas stated that VGI has drawn its clear intention to get benefitted from a decline in the CTM’s share price by taking a short position on the company. He added that these VGI claims which in company’s view are “not supported by the facts” could cast a potential impact on CTM’s shareholders, thereby disregarding the company’s sound financial position.
Just after the company lifted the trading halt following the completion of VGI report review, CTM share price plunged heavily. It has nosedived as much as 27.46% to last close on $20.050 on 31 October 2018.
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