Among all the shares on the S&P/ASX 200 Index (ASX: XJO), WiseTech Global Ltd (ASX: WTC) is leading the losses today. At the time of writing, the WiseTech share price is down 8.38% to $30.19 a share.
On Friday last week, WiseTech shares closed at $32.40, but opened at $30.98 this morning and have been trending lower all day. Even after this drop, however, WiseTech shares are still up a hefty 57% since 12 August. So why this dramatic fall for WiseTech today?
Why WiseTech shares are plummeting today?
WiseTech is known for its volatility, but also for its status as one of the ASX's WAAAX stocks, the name given to the group of some of the ASX's highest-flying tech shares.
Today's moves seem to be the result of a new short-seller attack on the company. The Sydney Morning Herald (SMH) revealed today a short-seller firm named Viceroy Research has published an analysis alleging that "many" of 37 listed acquisitions made by WiseTech in the past 4 years "are from distressed sales or bankrupt companies with revenues falling post-acquisition".
The analysis apparently shows that "revenues in a majority of these businesses have flatlined or are in decline, margins are substantially below WiseTech's consolidated group margins and many of the businesses do exactly the same thing in different countries".
The SMH reports that Viceroy Research also claims WiseTech "created 'fake value' through dozens of non-material acquisitions, effectively buying revenue at a lower multiple than what it trades at in a strategy known as a 'roll-up'".
If these allegations were true, it would obviously indicate WiseTech is not as valuable as its recent market capitalisation and share price would suggest.
The report quotes Viceory analyst Gabriel Bernard as stating, "We cannot see how WiseTech has an out-of-the-box solution while continuously requiring acquisitions of small-time customs clearance players in obscure geographies".
Right of reply
However, WiseTech has come out swinging against the charges. WiseTech's chief financial officer Andrew Cartledge told the SMH in response that he had "serious concerns" over the claims, which he says "lacked understanding of the firm's acquisition strategy and the risk, cost and time involved in developing technology internally versus acquiring it".
He went on to state:
WiseTech has been clear that its acquisition strategy has not been about revenue roll-up… It is about bringing in talented and knowledgeable people and critical IP, converging this IP with WiseTech's own technology to optimise our development pipeline, accessing new markets and customer bases, accelerating our geographic expansion and solidifying CargoWise as the leading integrated global logistics software solution of choice for the major players in the market.
This is not WiseTech's first rodeo when it comes to short-seller attacks. In October last year, the company faced similar charges from another short-selling firm called J Capital. That report also alleged WiseTech was overstating profits and organic growth rates.