The TechnologyOne Ltd (ASX: TNE) share price has started the week on a very disappointing note.
The enterprise software company’s shares dropped as much as 8% at one stage before ending the day down 6.8% at $8.15.
Why did the TechnologyOne share price crash lower?
Investors were selling TechnologyOne’s shares on Monday after it became the subject of short attack by Hong Kong based research firm GMT Research.
According to the AFR, GMT Research claims TechnologyOne used accounting tricks to pull forward revenue and profits. This resulted in the company “artificially creating growth and hiding a major slowdown.”
The company’s analyst, Nigel Stevenson, has suggested that its FY 2019’s net profit before tax of $76.4 million was inflated by more than 200%. It also believes that revenue growth was actually flat in FY 2018 and then up just 1% in FY 2019.
This morning the company admitted that it had met with GMT Research, but that it only spent 30 minutes with its team. It also stressed that it was not contacted about the allegations prior to publishing.
It said: “GMT Research spent only 30 minutes with us, so we are very surprised with their limited knowledge that they would have published a report in the first place, and more importantly without verifying the accuracy of the report with us. TechnologyOne was at no time shown the report.”
Management also confirmed that “the claims made in the AFR by GMT Research are false and misleading.”
Adding: “TechnologyOne unreservedly stands 100% behind our Audited Accounts as being a true and accurate reflection of our business over the last 21 years.” The company advised that it will now refer the matter to ASIC.
It concluded by confirming that it remains on track to achieve its guidance in FY 2020. That guidance is for net profit before tax growth of 8% to 12% year on year.