News & Analysis

WiseTech’s boss hits back again on short-seller report – and its shares surged

- October 23, 2019 3 MIN READ

 

Logistics giant WiseTech’s battle with Chinese short-seller J Capital, which claims the tech unicorn exaggerated profits and revenues, went another round today with CEO and founder Richard White (pictured above) calling the allegations “self-serving” and rejecting them all in a second, detailed response to the ASX.

“WiseTech rejects the claims of financial impropriety and irregularity contained in the [J Capital] Report,” the company told the ASX in a statement today.

“The publisher of the Report discloses that it may realise significant gains from a decline in WiseTech’s share price.”

The Sydney-based software unicorn, used globally by more than 12,000 logistics organisations in 150 countries, has been under attack for the past week after J Capital released a scathing 31-page report into WiseTech last Thursday, accusing it of fudging its growth figures.

WiseTech shares plunged before being suspended last Thursday. They returned to trade on Monday only to be suspended again within an hour after J Capital released a second report attacking the business, with more than $1 billion in value wiped from its market cap.

WiseTech shares rose 8.48% today to close at $28.53. In September they were above $38. 

White called J Capital’s allegations “self-serving and misleading” in his statement to the ASX, following up with a conference call to investors and analysts on Wednesday morning where he ruled out taking legal action because it was too difficult to pursue an offshore company.

“Ultimately, the best way to protect the integrity and value of our business is to rise to the challenge and continue to deliver on what we have set out to do,” he said.

“Our people, in all our teams across the world, are aligned in our determination to execute our growth strategy to deliver long-term value for our shareholders, our communities and the logistics industry.”

WiseTech said contrary to claims that business in China was shrinking, it’s growing at more than 50% annually, adding that the J Capital report even got the company’s capital raising figures wrong – out by $129 million.

The company issued an additional four-page rebuttal of J Capital’s allegations to the market this morning, including J Capital claimed just six of the top 25 global freight forwarders used WiseTech’s Cargowise software. The company says 22 use it. All of the top 25 are customers, along with 43 of the top 50 third party logistics providers.

The business has been on a buying spree since listing in 2016, spending around $400 million buying 33 software companies. J Capital claims many of them are duds and overvalued.
WiseTech rejects the claim, saying they were not revenue rollups or about customer acquisition.
“Acquisition values reflect the strategic nature of the assets, predominantly founder-led businesses identified for key attributes relevant to our needs,” the company said.
Responding to J Capital’s claim that organic growth was around 10%, WiseTech said: “Our organic growth for FY19 was 33% and for FY18, 37%. We have articulated the many drivers for organic revenue growth and indicated our average organic growth is in the range of 20%-30% per annum.”

White said they were “resolute” in the company’s vision to be the operating system for global logistics and reconfirmed the company’s earning guidance.

“We continue to stand strongly by our strategy, our technology and our business model, all of which together fuel significant growth and global expansion,” he said.

“We confirm our guidance for FY20 of revenue of $440m – $460m, with revenue growth of 26% -32% and EBITDA of $145m – $153m with EBITDA growth of 34% – 42%.”

Morningstar labelled the J Capital report “unconvincing” and “a little bit like a hit job” in the note on Monday, but the analysts believe the business is sound, although highly overvalued.

Morningstar puts WiseTech’s fair value at $16.46. It’s surging share price has put its market cap at worth more than 100-times earnings and 20x revenue, making it the most expensive tech stock in the world.

 

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