VGI may face class action over $800m Corporate Travel Management share dive

MAURICE Blackburn has become the first class action law firm to flag its interest in Corporate Travel Management, which suffered a 27 per cent share dive following a short-sell attack that sent $800m of value up in smoke in one day.

Founder and Portfolio Manager VGI Partners Rob Luciano responded to suggestions of a class action lawsuit. (Jane Dempster/The Australian)

CLASS ACTION TWIST

MAURICE Blackburn became the first class action law firm yesterday to flag its interest in Corporate Travel Management, which suffered a 27 per cent share dive on Wednesday.

But, in a rather surprising twist, legal eagle Rebecca Gilsenan will also be looking at whether VGI Partners bears some responsibility for sending about $800 million of value up in smoke that day at the Brisbane firm.

The Sydney-based hedge fund, which has shorted CTM shares to the tune of $55 million and benefits by a price dive, precipitated the drama by releasing a blistering critique of the business last Sunday. CTM has refuted the bulk of the criticisms.

INSIDE CTM’S BATTLE AGAINST SHORT-SELLERS

“If upon further investigation it becomes clear to us that the red flag issues outlined in the VGI report were not properly disclosed to investors earlier and should have been, then a class action becomes more likely,” Gilsenan said.

“If in fact our investigation reveals that the VGI report was misleading and contributed to the share price fall, then we may be looking to pursue a case outside the parameters of a traditional action.’’

VGI boss Rob Luciano responded by voicing fears for independent research analysts if Maurice Blackburn took action against his firm.

“Well it’s clear you wouldn’t want to be a medical practitioner breaking the news of terminal illness to a Maurice Blackburn lawyer. It sounds like they would blame you for their predicament,’’ he said.

Meanwhile, City Beat spies tell us that VGI has significantly increased its short position in CTM since midweek.

QBIOTICS HOPES TO SECURE $26M

THE blushwood tree grows only in the Atherton Tablelands and its red berries are toxic if eaten.

But they also contain compounds which could provide a breakthrough in the treatment of cancer in animals and, eventually, people.

Using the berries, Brisbane biotech outfit QBiotics Group is on the cusp of securing regulatory approval in Australia, US and Europe next year to roll out its drug “tigilanol tiglate’’ to treat dogs, cats and horses.

Back in August it signed a marketing and distribution deal with Virbac, one of the world’s biggest animal health companies.

The Taringa-based firm is also carrying out preclinical trials on a wound-healing product for humans and is in early clinical development for veterinary markets.

Of course, like most similar high-risk endeavours, their work has been a cash-burning exercise without revenue since launching in 2004 with Dr Victoria Gordon at the helm.

Indeed, in just the past eight years the firm has poured about $65 million in to the development of its technology and intellectual property.

Illustration of Dr Victoria Gordon by Brett Lethbridge.

It suffered $12.4 million of red ink last year and has piled up more than $41 million in accumulated losses.

To compensate for that outflow of funds, QBiotics has repeatedly raised money from largely sophisticated investors willing to roll the dice.

The company is at again, hoping to secure up to $26 million in a capital raising that opens later this month.

It’s an exercise critical for the firm to survive. With just $10.8 million in cash reserves, QBiotics says it’s “dependent on the offer…to support operations until recurring revenue sources or liquidity events can be obtained’’.

Dr Victoria Gordon of QBiotics, a Brisbane-based biotech company.

The offer is not underwritten by brokers and will not result in a listing on a stock exchange despite Gordon and chairman Rick Holliday-Smith acknowledging that investors “are keen for a liquidity event’’.

We bet they are! QBiotics released a prospectus to raise up to $12.5 million in 2016 but later scrapped the planned IPO.

Long-term plans still call for a public listing. Until then, investors know there is no market to trade the shares and their investment is, as the company acknowledges, “long term, high risk and illiquid’’.

We hoped to chat with Gordon yesterday but couldn’t reach her in the US, where she is, not surprisingly, trying to raise a bit more dough.