The WiseTech Global Ltd (ASX: WTC) share price crashed lower this morning after returning from its trading halt.
The logistic solutions company's shares sank as much as 11% to $26.61 in early trade before recovering slightly. When they hit that level it meant they had lost 20% of their value since the day before the trading halt.
Why is the WiseTech Global share price crashing lower?
Investors have been hitting the sell button in a panic following the release of a short seller report on Thursday.
In the report, J Capital alleges that the logistics solutions company is overstating its profits, its organic growth, and the performance of its European business. Further details of its allegations can be found here.
After the market close on Friday, WiseTech Global released a comprehensive rebuttal to these allegations.
It advised that there has been no overstatement of profit, growth or revenue, and that its accounts are accurate and not inflated through acquisition accounting.
The company's founder and CEO, Richard White, said "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, large and small. Our financials, our revenue, our profit, our growth rates and our product have all been verified comprehensively and form part of the external independent audits conducted annually."
What now?
I thought that WiseTech Global's response was strong and feel it has answered all of J Capital's concerns.
However, as we have seen previously with Corporate Travel Management Ltd (ASX: CTD) and Rural Funds Group (ASX: RFF), no matter how thorough a response a company gives, it won't stop some investors from hitting the sell button in a panic.
When the dust settles, this could potentially be a buying opportunity for investors. Though, I suspect the allegations could weigh on its shares in the near term.
