Slattery says the market was ‘almost right’ to bet against Megaport
Tech entrepreneur Bevan Slattery has revealed he thought the market almost right to turn against Megaport, the internet company he founded, and make it the most shorted stock on the ASX earlier this year.
Bevan Slattery said Megaport lacked focus and discipline (pic supplied)
Slattery said Megaport, which recently revealed a major turnaround, “lacked focus, fiscal discipline and leadership”.
The company’s share price started to drop at the end of January when it updated the market on its financials. Then the company secretary resigned, followed by chief executive Vincent English and chief financial officer Sean Cassidy. For a while Slattery, who founded the company in 2013 and was its chair, took control of day-to-day operations.
But last week, Megaport revealed a comeback after it reported an upgrade to its normalised earnings which would now be in the range of $19 million to $21 million. That was only a difference of $3 million in previous guidance but market was ready to forgive and forget.
Its shares have jumped from a low of $3.98 in April to $9.87 on Friday.
It also said its 2024 guidance was now higher than the previous expectations of between $41 million and $46 million.
On LinkedIn today, Slattery showed posted a table which listed Megaport as the company with the highest percentage of shorted stock in April this year. About 10 per cent of the company was being shorted, putting ahead of Flight Centre.
“Of all the stocks on the ASX this was the one that every (hedge fund, arbitrager, and short fund) bet against the most,” he said.
“And to be honest, they were right. Almost.
“Fundamentally, Megaport was an amazing business, had outstanding growth, loyal and sticky customers, a gross margin, barrier to entry and in a space that continues to grow. So many of the attributes of a successful business.
“But what it lacked was focus, fiscal discipline and leadership. That’s what shareholders and investors were telling us in meetings and by being the most shorted stock on the ASX.”
Slattery brought in Michael Reid, an Australian who had been working for Cisco subsidiary ThousandEyes. Leticia Dorman was made chief financial officer.
“In the space of 120 days there was a $40 million annual cash turnaround in the business, a reinvigorated focus on being a product/cusomter lead business and the team started rowing together in the same direction.
“We still have a lot to achieve and a massive opportunity ahead of us.”
He said the listing as the most shorted stock was a reminder of how a great business can lose its way, but also how with the right focus and leadership things can change.
“As I always say you can’re appreciate the penthouse if you haven’t spent time in the ****house. Well, this was indeed a ****house moment.”
