Corporate Travel Management under siege as short sellers raise red flags

IN the swish new offices of a top law firm, Brisbane’s close-knit, largely private school educated executives were closing ranks. Corporate Travel Management was under fire from Sydney-based short-sellers, dubbed ‘bottom feeders’. Here’s how it unfolded.

Corporate Travel Management founder Jamie Pherous.

IN the swish new offices of top law firm Allens, Brisbane’s close-knit, largely private school educated business community was closing ranks.

One of their homegrown success stories, Corporate Travel Management (CTM), was under fire from Sydney-based short sellers VGI Partners and they were having none of it.

“These people are just bottom feeders,” sniffed veteran investor Howard Stack at the company’s annual general meeting on Wednesday.

As the meeting got underway, CTM shares were tanking in response to a VGI report that had raised 20 “red flags” about the company, including that it operated phantom offices, inflated profits and falsely claimed technology patents.

CTM founder Jamie Pherous, a man who jumps out of helicopters in Alaska with snow skis on his feet for fun, was not letting VGI impede what he calls the company’s incredible growth trajectory.

CTM BOSS ESCAPES TO ISLAND AFTER WEEK FROM HELL

Corporate Travel Management boss Jamie Pherous.

He conceded the company should have updated office locations on its website and not claimed patents over technology, but was otherwise unrepentant.

Pherous, one of Queensland’s richest men, was inspired to start CTM as a young accountant at Arthur Andersen in 1994 who found himself stuck in airports because the firm’s travel agency couldn’t arrange flights.

His success has until now been cheered by stockholders who had seen their $1 a share investment in the company’s initial public offering eight years ago soar more than 2600 per cent.

But storm clouds are gathering for the former market darling. CTM shares ended Friday down 26.4 per cent for the week at $20.32 and almost 40 per cent off a record $33.45 in September.

Founder and Portfolio Manager VGI Partners Rob Luciano won’t take too kindly to be called a ‘bottom feeder’. (Jane Dempster/The Australian)

Yesterday class action specialist Maurice Blackburn Lawyers said it was investigating the circumstances surrounding the price dive.

Wednesday’s annual general meeting on the 26th floor of one of the city’s flashiest buildings had the feel of a prosperous golf club committee meeting called to discuss an infestation of locusts on the 18th hole.

A frisson went through the crowd when Stack, who has served on the boards of Flight Centre and Bow Energy, referred to VGI as bottom feeders.

Stack and Pherous are on first name terms, perhaps not surprising given both are “old boys” of the 150-year-old Brisbane Grammar School. Stack, who was the school’s captain in 1962 and whose son also attended Grammar, has been chair of its board of trustees since 1991.

Pherous, whose parents ran a fashion boutique business, graduated from Grammar in 1985.

Corporate Travel Management’s Jamie Pherous is an elite school ‘old boy’. Pic Annette Dew

Two years ago, he addressed the school’s Enterprise Society telling the assembled boys that “the harder you work, the luckier you get.” CTM director Stephen Lonie is also a Grammar “old boy” and serves on the board of trustees.

A CTM spokesman said that while shareholders such as Stack are known to Pherous, it was not a close relationship and it was not a matter of the leaders of the Brisbane business community closing ranks. He said CTM had received support from investors around Australia.

One of CTM’s staunchest supporters is broking firm Morgans, another fixture in Brisbane’s clubby business world.

Morgans, founded by the late Paul “Porky” Morgan, is under fire for alleged hometown boosterism towards not only CTM but another short-selling victim, Blue Sky Alternative Investments.

Morgans was the underwriter of CTM’s initial public offering in 2010 and Belinda Moore, its analyst covering the company, owns shares in the company.

Morgans has been bullish on the company’s prospects but on Thursday, it cut CTM’s price target to $23.30, noting its “strong trading result (had been) overshadowed” by VGI.

Morgans’ equally upbeat view on Blue Sky Alternative Investments, raised eyebrows earlier this year given they had just helped Blue Sky raise $125 million to boost the company’s balance sheet.

Doug Tynan, a director of VGI.

In April, when Blue Sky stock was being hammered following a damning report by short sellers Glaucus, Morgans was still advising clients to hold the stock.

A Morgans spokesperson said the negative inferences made against the brokerage by some commentators “are very disappointing and we are unsure as to their motivation”.

The spokesperson said its research team was governed by strict industry standard guidelines but analysts were permitted to own shares in ASX listed companies.

“In the event that the analyst owns shares in the company they are researching, this is disclosed prominently,” she said.

Back at CTM, Pherous is no doubt wishing he was on the ski slopes.

“When you get dropped off by the helicopter, you look around and cannot see another human being – it really concentrates the mind,” Pherous says.

At the moment the only thing concentrating Mr Pherous’ mind is VGI, whose directors include Rob Luciano and Doug Tynan, two of the country’s savviest investors who probably aren’t going to forget the “bottom feeder” jibe anytime soon.

Tynan is the son of veteran Brisbane businessman and stockbroker David Tynan and a graduate of St Joseph’s College Gregory Terrace, by coincidence one of Brisbane Grammar’s fiercest rivals on the rugby field. VGI declined to comment.