One of the worst performers on the Australian share market on Wednesday has been the Corporate Travel Management Ltd (ASX: CTD) share price.
In late morning trade the corporate travel specialist’s shares have crashed over 21% lower to $21.74.
At one stage Corporate Travel Management’s shares were down as much as 27.5% at $20.00.
Why are Corporate Travel Management’s shares crashing lower?
Corporate Travel Management’s shares had been in a trading halt this week whilst it responded to a short seller report by VGI Partners.
VGI Partners is a hedge fund that holds a substantial short position (~2 million shares) in the corporate travel specialist and stands to benefit from any share price decline.
It released a 176-page report to clients over the weekend which identified 20 concerns in relation to the company’s operations.
Although Corporate Travel Management responded to the 20 concerns today with a comprehensive rebuttal, it hasn’t been enough to stop its shares from cratering amid concerns that this could turn into another Blue Sky Alternative Investments Ltd (ASX: BLA).
While it has been a dark day for shareholders, VGI Partners will certainly be smiling. Based on its last close price of $27.64, two million shares had a market value of approximately $55.4 million.
Those two million shares are now worth approximately $43.5 million, meaning a paper profit of $11.9 million at this point.
Should you sell your shares?
While I thought that the company’s response was solid and comprehensive, it was inevitable that its shares would sink lower due to panic selling.
If you’ve held onto your shares, then I wouldn’t be in a rush to sell them now. Unless VGI Partners can poke holes in this rebuttal, I wouldn’t expect its shares to fall much further than here.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.