Legal actions against VGI Partners, page-76

The Australian newspaper this morning:

‘A New York professor caught up in a stoush between short-sellers and Corporate Travel Management has defended the company’s use of his data to calculate whether it should write down the book value of its North American arm.

Aswath Damodaran said he “would have preferred to stay neutral” in the battle between the company and hedge fund VGI Partners, but “there are some misperceptions about my date that I would like to clear up”.
In a scathing reports two weeks ago that scoured 27 per cent from Corporate Travel’s share price, VGI raised 20 “red flags”, including the value of the North American business.

The fund questions why the discount rate Corporate Travel used to figure out whether the North American unit needed a write-down went down between 2018 and 2018 when interest rates in the US had been rising.

Corporate Travel said to work out the discount rate it used equity risk premium data calculated by Professor Damodaran, who posts his work on a free website.

“I am not trying to be boastful, but a survey of practitioners by Pablo Fernandez found that my data is among the most widely used for equity risk premiums around the world,” Professor Damodaran said in an email to media outlets yesterday.

Professor Fernandez’s 2010 survey of 2400 companies and analysts found Professor Damodaran’s website was the most popular external data source among companies and analysts.

“I am not sure where the quote that the only people who use my data are undergraduate students working on projects is, but whoever made it (and I am assuming is was someone at VGI) needs to do their homework,” he said.

“Finally, I will not comment on the rest of the disagreements that VGI has with CTM but I will comment on the one I am I am a key part. The equity risk premium in 2018 was lower than the equity risk premium in 2017, and I am will to wager on that, and thus the discount rate used in 2018 should be lower than the discount rate used in 2017.”

He said this also seemed to be what Ernst and Young are saying.

“At least on this issue EY is right and VGI is wrong, and focusing on the data source or the fact CTM did not ask for my permission is a distraction,” he said.

VGI declined to comment.’