The Corporate Travel Management Ltd (ASX: CTD) share price is down 3.8% today and down nearly 40% since its September 2018 record share price highs above $34 after the company fell victim to a 'short seller report' and the decimation of growth shares generally in the final quarter of 2018.
Back in November 2018 Corporate Travel was accused by VGI Partners of changing its revenue recognition policy from financial year to year and of massaging cash flows to give the impression of greater balance sheet strength or weakness at different points in time.
Corporate Travel fought back though by stating it had hired credible big 4 auditor EY to inspect its accounts who then came back to dismiss VGI's accusations as false or based on an incorrect understanding of the cash flow timings (accounts receivable and payable) of a corporate travel business.
According to ASIC's latest short seller report (accurate as at December 28 2018) Corporate Travel has 4.55% of its shares outstanding shares shorted, compared to 4.57% on November 8 2018 at the height of the storm VGI attempted to create around the stock.
Given VGI has reportedly been shorting Corporate Travel for a long time it's probably still well underwater on its short bet and facing the prospect of more losses if the travel group delivers strong free cashflow growth for the six-months ending December 31, 2018.
VGI's only other well-known short position was in Slater & Gordon Limited (ASX: SGH), although Slater & Gordon was a well-known basket case that even bought a company for $1.2 billion while it was being investigated for accounting fraud in the UK.
As such if VGI's Corporate Travel short bet turns sour it'll be an embarrassing outcome given all the credibility it has staked on it.
Outlook
Clearly, Corporate Travel's strong growth rates are reliant to some extent on its acquisition strategy, which means it's more reliant on most on having a high valuation as it occasionally seeks to raise equity.
While the partial reliance on acquisitive growth is not idea and carries risks, it's still delivering some organic growth and forecasting EBITDA (operating income) of $144 million to $150 million in FY 2019, which would represent growth of 15%-20% in FY 2019.
The travel sector in general has been hit hard recently with Flight Centre Travel Group Ltd's (ASX: FLT) share price hitting a 52-week low and Webjet Limited (ASX: WEB) also diving as investors worry about airlines and the likes of Sydney Airport Holdings (ASX: SYD) reporting lower passenger numbers.
