The WiseTech Global Ltd (ASX: WTC) share price will be under the spotlight this week after management responded to the short attack.
WiseTech Global was founded in 1994 by Richard White to provide software to the logistics sector. Since then it has grown to become a global provider of logistics software, claiming to service 19 of the top 20 logistics companies globally. WiseTech makes money by charging its customers on a ‘per use’ basis rather than as a subscription model. Meaning, WiseTech directly benefits as its customers grow their businesses.
How Did WiseTech Defend Itself?
After a rapid 10% fall of the WiseTech share price, the tech business went into a trading halt for the company to respond and defend against J Capital Research (JCAP).
WiseTech said that the report contains many claims and allegations that are untrue and entirely rejects what JCAP was saying about financial impropriety and irregularity.
The logistics software business said it was published without asking WiseTech and the fact that JCAP could profit from a decline in the share price were things worth questioning.
WiseTech 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.
“We support investigations by Australian regulators of attempts by overseas domiciled short sellers to target ASX companies and in prosecuting unconscionable conduct. We are and will remain focused on correcting material information and protecting our shareholders from such conduct.”
WiseTech said there was no overstatement of profit, growth or revenue, the accounts are accurate and not inflated through acquisition accounting.
WiseTech said its organic revenue growth of 33% is correct and is primarily on-demand licencing where customers are billed monthly for their use of the platform and for executing transactions. The company also explained its accounting treatment of its software costs and investments.
The company explained that was no overstatement of its European or EMEA revenue, revenue is based on the customer’s invoicing location, being the billing address.
Management also said that its pre-IPO accounting was not unusual, JCAP was being “potentially misleading” by using the FY16 statutory financials because it included significant one-off IPO costs. That’s why WiseTech provided materials excluding the IPO costs too.
WiseTech defended its audit saying it was comprehensive and that the deed of cross guarantee is irrelevant. An auditor changed because she was on maternity leave.
Finally, the company reminded investors that co-founders Richard White and Maree Isaacs, and long-term directors & shareholders Charles Gibbon and Mike Gregg all still hold an extremely large amount of shares.
What Now?
Investors will get the chance to respond to the allegations and WiseTech response this week. The WiseTech share price even now isn’t attractive to me, it has a very high price/earnings ratio, but WiseTech is one of the better businesses on the ASX.
However I’d much rather buy the growth shares in the free report below compared to WiseTech.
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