Technology One (ASX: TNE) has seen its share price fall 5% at the time of writing after being on the end of a negative report by a shorter.
What is Technology One?
Technology One is one of Australia’s largest software as a service (SaaS) businesses with offices in six countries. It has been operating for more than three decades and now has over 1,200 businesses, government departments and statutory authorities as clients.
The short report
According to
the Australian Financial Review, GMT Research has issued another attack against another ASX share. It has previously attacked other Australian businesses like Treasury Wine Estates
(ASX: TWE).
GMT Research claims that Technology One has used accounting tricks to pull forward revenue and profit, hiding a major slow down in the business.
The AFR reported that Nigel Stevenson from GMT Research said that the outfit had estimated FY19 profits were inflated by more than 20%.
One of the issues, according to GMT is that new accounting rules meant revenue should be recognised over a contract’s period rather than booking it upfront. GMT allege that Technology One changed contract renewal dates to get around this.
Technology One’s response
This morning the ASX tech share has responded.
The company said that GMT Research only spent 30 minutes talking to management. Technology One said it was very surprised GMT would release a report in the first place, didn’t verify the accuracy of the report and didn’t show the report to the company.
Technology One said the claims made in the AFR by GMT Research are false and misleading. The company stands behind its audited accounts as being a true and accurate reflection of the company over the last 21 years.
The company has referred the matter to ASIC and stands by its guidance to the market.
Technology One CEO Edward Chung sent an email to the AFR, he said: “As we all know this seems to be the standard approach taken by the short seller community, to ambush a company. Given this background we see GMT Research has little credibility, and we do not plan to provide any further comments on the matter.”
Summary
Time will tell whether this makes a different to the company. The Technology One share price hasn’t crashed like other shares have after a short report. The timing of revenue may not be as bad as a claim like a business being worthless. I’m not personally looking to buy Technology One shares, but if I owned shares I wouldn’t be trying to sell them from my own portfolio either. However, shareholders will have to decide if the claims about revenue, profit and the valuation are serious enough to warrant a sale.
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