The WiseTech Global Ltd (ASX: WTC) share price will return to trade this morning following the release of its response to a second short seller report by J Capital.
What did WiseTech say?
WiseTech advised that it rejects the claims of financial impropriety and irregularity contained in the report. Further, it pointed out that it was published without prior inquiry to WiseTech and the publisher may realise significant gains from a decline in its share price.
The company’s founder and CEO, Richard White, said “We are very concerned that claims in this Report may mislead and manipulate the market to the detriment of WiseTech’s business and our shareholders. We are resolute in our vision to be the operating system for global logistics. We continue to stand strongly by our strategy, our technology and our business model, all of which together fuel significant growth and global expansion.”
Mr White then reaffirmed its guidance for FY 2020 of revenue of $440 million to $460 million and EBITDA of $145 million to $153 million. This represents annual growth of 26% to 32% and 34% to 42%, respectively.
Response to the claims.
The company then went through each of J Capital’s claims and refuted them one by one.
In response to allegations that its solutions are not used by as many as the company claims, it said: “We provide our solutions to over 12,000 logistics organisations across 150 countries. All 25 of the top 25 global freight forwarders are customers, as are 43 of the top 50 global third-party logistics providers , however, we are still in early penetration of both new and existing customers. Of these, 22 of the 25 global freight forwarders are using CargoWise One specifically (not 6 as claimed in the Report).”
WiseTech then responded to claims that its customer attrition rate is wrong.
“CargoWise One has less than 1% pa customer attrition on our CargoWise platform in FY19, as it has been for the last 7 years. Attrition rate and method of calculation is disclosed and relates only to the CargoWise One application suite (excluding any customers on acquired legacy platforms).”
It also hit out at J Capital’s survey of just 13 small customers, saying that it is not a representative sample.
Management then went on to explain that its organic growth is strong, its commercial model drives transaction and revenue growth, that it invests significantly in its technology and product development, and that it buys strategically valuable assets and invests in these businesses.
In respect to the latter, it advised that its integration approach is well established and integrations are on track to deliver value.
It concluded: “WiseTech reaffirms its previous statements rejecting entirely the unfounded allegations of financial impropriety and irregularity contained in both this and the previous Report. In addition to the initial responses provided on allegations above, it is the Board’s opinion that this Report erroneously either misunderstands, selectively presents or misrepresents the company’s performance, acquisitions, product quality and customer relationships.”
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of WiseTech Global. The Motley Fool Australia has no position in any of the stocks mentioned. 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.