Class action on the table after short seller report

Written on the 5 November 2018 by Business News Australia

Class action on the table after short seller report

Maurice Blackburn Lawyers is set to weigh in on VGI Partners' $55 million short on Brisbane-based travel company Corporate Travel Management ('CTM', ASX: CTD), with a class action potentially on the cards.

But who the Melbourne-headquartered firm will be against is now the question.

An investigation is currently underway into the circumstances surrounding the 27 per cent price dive in CTM shares, and what it reveals will determine whether the travel agency or the hedge fund is under fire.

The share price fall followed blistering criticisms of Corporate Travel Management in a 176-page report from VGI detailing 20 "red flags", which were emphatically rebuffed by CTM executives at the group's AGM on Wednesday. 

Principal Lawyer with Maurice Blackburn, Rebecca Gilsenan, says the accounting and operational issues identified as red flags in the VGI report will be scrutinised as part of the class action investigation.

"If upon further investigation it becomes clear to us that the red flag issues outlined in the VGI report were not properly disclosed to investors earlier and should have been, then a class action becomes more likely," Gilsenan says.

"If in fact our investigation reveals that the VGI report was misleading and contributed to the share price fall, then we may be looking to pursue a case outside the parameters of a traditional action."

Gilsenan says both parties accuse each other of misrepresenting the true position at CTM.

"Either way, clearly something drastic has occurred here which has taken shareholders and the market by surprise, and an investigation into what has caused those shareholder losses is a prudent first step we will take before committing to a class action," she says.

"If there has been some form of corporate misconduct that has led to this significant price drop, then a class action is a sensible and efficient market-based enforcement mechanism to pursue accountability and redress for those affected."

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