By Colin Kruger
Logistics software provider WiseTech hit back at "untrue" allegations by short-selling hedge fund J Capital Research that the $10 billion-valued company overstates its profits and uses accounting tricks to cover its tracks.
"WiseTech rejects entirely the allegations of financial impropriety and irregularity contained in the document," the company said in an ASX statement after the market closed on Friday, referring to J Capital's research.
WiseTech chief executive Richard White still owns the majority of the $8.8 billion company.Credit: Steven Siewert
"We are very concerned that the allegations in the document may mislead and manipulate the market to the detriment of WiseTech's business and its shareholders," said company founder and chief executive Richard White.
Mr White added that the company supports investigations by Australian regulators of attempts by offshore short sellers to target ASX companies "and in prosecuting unconscionable conduct."
Earlier on Friday, brokerage firm Evans and Partners released its own analysis that it claims "destroys" J Capital's short thesis.
According to the research firm's analysis WiseTech hasn't had a single year in which receipts on its cash flow statement indicated any issue with its revenue reporting.
"Our conclusion from this exercise ... is that the benchmark figures they are using to accuse WiseTech of fraud are somewhere between inaccurate, and purposefully misleading," said Evans and Partners senior analyst Paul Mason.
The benchmark figures they are using to accuse Wisetech of fraud are somewhere between inaccurate, and purposefully misleading
Evans and Partners
WiseTech shares fell more than 10 per cent to $30 before on Thursday before trading was halted. Evans and Partners has a positive recommendation on the stock, and values the shares at $35.59.
J Capital, which is run by former Labor candidate for the federal seat of Wentworth, Tim Murray, claimed in a research note released on Wednesday that WiseTech had overstated its profits by $116 million — or 178 per cent — since listing on the Australian Securities Exchange in April 2016.
In the report J Capital cited a review of European filings and interviews with former employees, and concluded the company's revenues were declining and earnings growth was significantly lower than it had reported.
"WiseTech is able to shield subsidiaries from audit scrutiny through an Australian peculiarity called the 'deed of cross guarantee'," J Capital's New York based research director Anne Stevenson-Yang wrote. "Simply put, the auditors aren't looking at the numbers closely enough."
The report is the latest in a series of aggressive tactics by short sellers against listed Australian companies like Rural Funds Management (RFF), construction giant CIMIC Group, Treasury Wine Estates and travel company Corporate Travel Management.
RFF has commenced legal proceedings in the NSW Supreme Court against the short seller, US-based Bonitas research over the allegations it has made.