Corporate Travel Management (CTM) has threatened VGI Partners with a lawsuit following the hedge fund’s explosive allegations against the corporate travel company.
VGI, which has previously disclosed its short position in CTM, released a scathing report of the company’s business practices, highlighting 20 “red flags” and throwing into question its accounting practices and the scale of its business.
Short-selling is the legal practice of betting the share price of a company will fall. It’s common for short-sellers to criticise their targets and release reports detailing their shortcomings or accusing them of not providing enough information to their shareholders.
According to SMH, the lawsuit alleges a conspiracy to hurt the company and market manipulation.
If it goes ahead the case could reshape the rules of public criticism against businesses.
CTM’s lawyers have requested VGI turn over any documents and the names of people who assisted it with the report.
Legal sources have told SMH the request raised the possibility the hedge fund was assisted by financial advisors and journalists. It also alleges VGI may have offered employees payments in exchange for information.
Jamie Pherous, CEO of CTM, told the Courier Mail that short-sellers need stricter regulations to put a stop to “flimsy analysis and glib assertions”.
“There are lots of other high-growth ASX companies at which they could have thrown 20 poison darts … but it needs to be balanced,” he said.
“The same laws should apply to short sellers as apply to a company director.”
CTM has declined Travel Weekly’s request for comment.
The corporate travel company posted its half-yearly results last week, reporting double-digit growth across all key financial metrics.
The company’s underlying net profit was $46.2 million in the six months to 31 December 2018 – up a whopping 20 per cent compared to the prior corresponding period.