And another short seller has lobbed a Molotov cocktail at a market darling! Precisely seven months since Soren Aandahl (then of Glaucus, now of Blue Orca) – more shit stirrer than short seller – lobbed a devastating Molotov cocktail at Blue Sky Alternative Investments from California, Aussie hedge fund VGI Partners has turned its guns on Corporate Travel Management. Blood in the streets stuff, this capital markets caper now is.
Aandahl’s was a masterful marketing play, (for lack of borrow) little more than $1 million staked on Blue Sky’s downside. VGI, though, stands to book big gains (or heavy losses), with nearly $60 million bet on a Corporate Travel plummet.
Corporate Travel devoted more than half of its holding statement on Sunday to pointing out the commercial imperative its predator had in its share price falling, a conspicuous fact VGI led its own presentation with. Blue Sky led with the very same whine against Glaucus on March 28. Its shares are down 89.9 per cent since then.
Unsurprisingly, Corporate Travel’s shares will remain suspended from trading until Wednesday, while founder Jamie Pherous scrambles to cobble together explanations for VGI’s variably damning “red flags” that might prevent market sentiment from turning – and turning into a savage sell-off. We don’t like his chances. And anyway, the CEO of any hyper-growth stock (one red flag not raised by VGI: Brisbane fundie Hyperion is Pherous’ largest shareholder) should be well and truly prepared for this moment.
Then there’s Morgan Stanley’s sheer bad timing. It sprayed out a “research tactical idea” on Friday morning arguing that Corporate Travel’s “share price will rise relative to the country index over the next 15 days. This is because the stock has traded off recently, making short term valuation much more compelling.” Short something, just not short term! This belongs on a brass plaque somewhere; hell, we’ll commission it ourselves.
But the most striking common denominator between these two Brisbane-based shit heaps is the entrenched role of the Eagle Street broker to all self-respecting Brisbane-based shit heaps, Morgans.
Yep, Morgans was stuffing Blue Sky shares down its poor clients’ throats like an aged-care nurse wielding a liquid feed tube. The Morgans analyst Scott “Scooter” Murdoch covering the Gladstone bedsit-flipper even bought a house (off-market) from its dislodged CEO Rob Shand. More classic still: the outward indignance of Morgans’ broking desk when a stock they were force-feeding as mindlessly as their grasp of its business model became radioactive. Got any more free advice, James Chandler? Dickhead.
On Sunday afternoon, Morgans had its own research flash: “at this stage, we do not agree with a number of the issues highlighted [by VGI’s report], however more work needs to be done.” Just not by them, Morgans’ clients might rightly hope. But, “as we heard from our Queensland conference a little over two weeks ago, [Corporate Travel] has made a very strong start to FY19…”
That would be news from an interview Pherous gave to Morgans broker Chris Titley that might as well have been a Brad Fittler cross to the Maroons’ sheds after State of Origin. To butcher a butchered Caesar: we heard, we transcribed, we believed, we on-sold. That Kenneth Hayne didn’t look at this sub-sector is a miracle surely beyond even the Pope’s reckoning.
Hello?! Morgans was lead manager of the 2010 float of Corporate Travel. Morgans fully underwrote the company’s capital raisings of November 2013, December 2014 and December 2016, new equity worth (at issue) $170 million. Morgans sold $35 million of shares in March 2015 for Pherous and a senior colleague personally, then again moved $53 million of Corporate Travel stock for an unnamed former executive in July 2018. Pay them a commission and you know what you get. Open a personal account with them and get what you deserve.