Short sellers: 1. Overpriced billionaires: 0
That thud you heard last week was the sound of some of the most shorted ASX stocks dropping like a stone.
In yet another win for the much vilified short sellers, WiseTech and Corporate Travel Management both unveiled horrific earnings updates, both unsuccessfully blaming coronavirus for their failures.
WiseTech, which was exposed by Hong Kong-based J Capital last year, has seen its share price decimated from $38.80 in September to $19.28. Given that WiseTech’s earnings appear to be shrinking and it is still is trading on an eye-watering PE multiple of 67, there could be a long way to go before this one bottoms out (Morningstar, which has a price target of $8, seems to agree).
Fellow rich-lister Jamie Pherous is having an equally difficult time with his corporate travel roll up. After goosing earnings for years with acquisitions, short sellers, led by VGI Partners, have shown the Queenslander is seriously lacking clothes, with its share price down from a peak of $32.68 in September 2018 to only $15.96 now.
Pherous’ attempts to explain a difficult December half on coronavirus didn’t go down too well either, given that unlike Corporate Travel Management investor relations department, investors seem to be aware that the virus was first reported on December 31.
We wonder how Corporate Travel Management mooted lawsuit, led by corporate ambo chasers ABL, against VGI is coming along.
Cheers for that
If it isn’t bad enough that young people are living through the greatest inter-generational theft in history, through a period of obscenely low interest rates and global budget deficits and money printing, they now have to put up with articles like this in The Sydney Morning Herald.
One suspects a 25-year-old entering the workforce with $50,000 in student debt and an average property price of more than nine times annual income would be extremely grateful to “learn from the generation before them that has already done it”.
A highlight was a 58-year-old secondary teacher who advised that he had been “been taking advantage of the benefits of salary sacrificing these contributions. My contributions have been at least 10% of my annual salary.”
Noting that superannuation earnings are taxed at close to zero is probably unhelpful to someone who can’t access their super for 40 years. (Although by then, the young will probably have no super left, with the government probably raising balances to pay the medical bills of baby boomers).
Money for nothing
It’s not enough that their ham-fisted policies have re-inflated the two decade old property bubble, and forced savers into ever riskier speculations: now the RBA thinks it deserves some new digs.
According to The West Australian the central bank wants to spend “$259.7 million [to] fix leaky sewer risers, replace lifts, reconfigure workspaces, install insulation and replace glass windows to bring the ageing building up to modern standards”.
The use of taxpayer dollars reinforces the notion that we’d be far better off simply shuttering the RBA and letting the market set interest rates at their correct level, rather than have them set by Philip Lowe, who at the age of 58, has never worked outside the public sector.
Say it ain’t so Joe
While he’s probably Australia’s best business journalist, even the greats sometimes miss their target. On Sunday, Joe Aston’s acerbic Rear Window column took aim (again) at billionaire Atlassian founder, Mike Cannon-Brookes, noting that, “Atlassian pays zero company tax to Canberra on greater than $1 billion of revenue booked here, thanks in no small part to its (welcome) use of the Research and Development Tax Incentive” and dubbing him “Australia’s most incessant poseur”.
Joe even compared Cannon-Brookes to Australia’s wealthiest heiress, Gina Rinehart — whose initially inherited fortune was wildly grown through extracting community resources out of the ground and flogging them off to China — who allegedly earned her soapbox (as if the soapboxes can be acquired).
Back to Cannon-Brookes, the reason Atlassian hasn’t paid corporate tax is pretty simple — it doesn’t currently generate net profit. Its most recent filing indicates gross profit of US$202 million and costs of US$204 million.
Not to mention (as Aston himself has pointed out) Cannon-Brookes has been regularly selling hundreds of millions of dollars’ worth of Atlassian stock, upon which, he presumably pays capital gains tax — as unlike many other billionaires, he remains domiciled in Australia (as does Atlassian itself, so Atlassian’s hundreds of Australian employees are also paying income tax).
Adam Schwab is a company director, angle investor and the author of Pigs at the Trough: Lessons from Australia’s Decade of Corporate Greed.
Why is it that nobody has been able to explain to me what good short-selling does society?
Can it be that it does no good? I don’t know how it can even be legal to sell what you don’t own and only buy it in order to deliver to your purchaser after your selling has driven its price down. Parasitism of the most destructive kind. There you are, Mr Schwab. Explain why I’m wrong about that.
I, too, would like an explanation. In any stock market emergency, the 1st thing banned is short-selling. If it is not good in an emergency, why is it allowed at all other times?
Isn’t it just another form of gambling.
The fact that the short-sellers can talk the stock down as well seems odd.
Short selling is simply an offer to sell someone shares at a given price on a given day. If someone decides to take up that offer, well that’s up to them. It’s a gamble by both parties – that the price on the day will be under the selling price (by the seller) or higher (by the buyer). I think the intention is to improve liquidity in the market, but its existence does of course reduce market value, so I don’t see how it’s a good thing for the company itself or society in general!
Here endeth the Wexfordsplaining.
I’m not necessarily endorsing this argument, but the argument is that poor/lazy management resulting in poor performance should be reflected in the share price as a disincentive, so the short sellers are motivated to do their research and find overpriced stocks to short and therefore signal to the market that there is a problem more efficiently than by other means (eg regulators and journalists). Or something like that.
> WiseTech, which was exposed by Hong Kong-based J Capital last year, has seen its share price decimated from $38.80 in September to $19.28
It was halved to $19.28, not decimated. If it had been decimated (reduced by 10%) it would be around $34.90.
Just sayin’ 😉
Yes. True. But words change by usage, even “wrong” usage. These days you can find the following descriptive entry in some dictionaries: decimate/ˈdɛsɪmeɪt/
verb
past tense: decimated; past participle: decimated
1.
kill, destroy, or remove a large proportion of.
“the inhabitants of the country had been decimated”
2.
HISTORICAL
kill one in every ten of (a group of people, originally a mutinous Roman legion) as a punishment for the whole group.
English is indeed a living language, and meanings do change. I guess I saw this as more of a mathematical definition where the “dec” has more of a stringent definition than it would otherwise have. Still, as you quoted, “a large proportion of” takes a mathematical context so perhaps I should relax a little 🙂
After all, December hasn’t been the 10th month for a while now. 🙂
Who the hell went and changed that and complicated everything? He needs to be taken out and stabbed!
“While he’s probably Australia’s best business journalist” referring to the snarly, spiteful Joe Aston is surely satire? Apart from his constant tirades laced with hate and envy, he proves again and again that he has little understanding of how business works. We don’t have many good business journalists around, some write for Crikey, and Joe is not within a bull’s roar of any of you.
Nonsense. Aston is hilarious, and goes in hard on his chosen targets, unlike the puff pieces from the rest of his coleagues at AFR.
Thanks Adam, a nice roll call there. Incompetence is not only finding its level, it is exceeding it in every way.