The WiseTech Global Ltd (ASX: WTC) share price is down 10% today following the release of a short report from China-based research firm J Capital Research.
About WiseTech
WiseTech Global was founded in 1994 by Richard White to provide software for 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 standard subscription model. Meaning, WiseTech directly benefits as its customers grow their businesses.
Short Report
Shares in the share market darling dived 10% in mid-morning trade after a highly critical short report was released by research firm J Capital Research.
The 31-page report accuses WiseTech of overstating profit and organic growth, and describes WiseTech’s reported European revenue growth as “suspect”.
J Capital estimates that since listing on the ASX in 2016, WiseTech has overstated its profit by as much as $116 million, which represents an overstatement of 178%.
The research firm claims to have found $116 million of ‘questionable assets’ on WiseTech’s balance sheet as of June 2019. According to the report, these questionable assets are in the form of intangibles that are capitalised each year and appear to match salary expenses from software R&D WiseTech has already expensed.
The research firm also believes that WiseTech’s reported organic revenue growth of 25% is more like 10%, among several other claims.
As a result, WiseTech shares have just been placed in a trading halt, which has followed a pause in trading that occurred at around midday today.
Summary
It’s been a rough week for ASX tech shares, with share prices in other growth ‘tech’ stocks like Afterpay Touch Group Ltd (ASX:APT) and Zip Co Ltd (ASX:Z1P) taking a beating. Yesterday, Afterpay received some scathing broker coverage from investment bank UBS, who put a price target of $17.25 on Afterpay shares.
Other ASX-listed companies that have recently suffered attacks from offshore research firms include Rural Funds Group (ASX: RFF) and Treasury Wine Estates Ltd (ASX: TWE).
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Disclosure: At the time of writing David owns shares in Afterpay Touch Group.
