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WiseTech shares plunge 12% before second trading halt is initiated

WiseTech’s shares have again been placed in a trading halt, as a second short report from Jcap reveals a new set of alleged issues.

WiseTech share price: short, short in focus Source: Bloomberg

WiseTech share price continues to fall

Just when you think you’ve caught a break…

The WiseTech (ASX: WTC) share price was hammered again today – falling 12.33% to A$26.30 after it exited its trading halt. Mind you, it was swiftly put in another, as a second Jcap ‘short report’ was released to the market.

While the first short report focused on the allegation that the WiseTech growth story wasn’t as rosy as it seemed – as well as a few other touches, such as claims concerning the ‘abrupt’ resignation of WiseTech’s Head of the Audit Committee, the second was more focused on the ‘customer experience’.

Taking one step back though. Last week WiseTech launched a staunch response to the first short report, noting that it contained ‘many claims and allegations that are untrue.’

Truth or untruth aside, these things indeed take on a mind of their own; and many market commentators have already noted that WiseTech’s astronomical valuation likely hasn’t helped matters.

The WiseTech response: ‘manipulation’

In response to the first short report, WiseTech (ASX: WTC) Founder & CEO, Richard White, commented that:

‘We are very concerned that the allegations in the document may mislead and manipulate the market to the detriment of WiseTech’s business and its shareholders, large and small.’

Mr White further added that WiseTech’s:

‘Financials, our revenue, our profits, our growth rates and our product have all be verified comprehensively and form part of the external independent audits conducted annually.’

The second wave

Such a response didn’t stop Jcap from releasing a second short report today, which focused on customer acquisition and retention.

Jcap’s new biggest issues: WiseTech's initial response was weak and the company’s acquisitions are 'poorly integrated and underperforming.'

Jcap got a total of 18 'former employees and competitors' to back up the integration claim.

Jcap also commissioned a survey of 13 of WiseTech's customers, finding that 25% of these customers were considering taking their business elsewhere. Three-and-one-quarter of a customer(s) aside, all up, WiseTech has around 12,000 customers, according to the AFR.

Jcap also noted that:

'When WiseTech does attempt to integrate these businesses, it usually raises prices on existing customers, and they tend to go elsewhere.'

An intriguing point indeed. According Taylors Securities Director and Analyst:

‘We need to highlight the excellent client retention rate, averaging close to 99% recurring revenue, which should be a strong positive signal and give confidence to investors.’

Finally, WiseTech (ASX: WTC) announced that 'unless ASX decides otherwise, the securities will remain in trading halt until the earlier of the commencement of normal trading on Wednesday., 23 October 2019 or when the announcement is released to the market.'

More to come.

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