Read the article there. There may be a real issue here. Cancel your $13 limit order.I smell lawsuits and real trouble.
Disclosure.I am out again with a relatively small loss (instead of a nice gain had I sold yesterday, eh?...but then that's two small losses if you're following along). Same reason as last time...until there is some explaining done, this one is going down further. No reason to ride it down. When the picture becomes REALLY clear, I'll look to get back in...or not.By the way, just to give you all confidence in the market; insiders and institutions hold 92% of the float. We can only assume that they are not participating in the short attack (as pointed out by the March 2011 writers). That leaves about 63,000 shares owned by the likes of you and me. Volume through mid-day is 2.2 million. Trade equals one buyer and one seller. Geez, that smells bad.-Randy
By the way, just to give you all confidence in the market; insiders and institutions hold 92% of the float. We can only assume that they are not participating in the short attack (as pointed out by the March 2011 writers). That leaves about 63,000 shares owned by the likes of you and me. Volume through mid-day is 2.2 million. Trade equals one buyer and one seller. Geez, that smells bad.Are you saying that the float available for shorting does not include shares owned by institutions? My understanding, which should not be given too much weight, is that the shares owned by institutions can be available for shorting.
For what it is worth, the NASDAQ site shows the EBIX short interest as of 31 January 2013 as 13,019,079 shares.
Still learning on this one. I'm told that the institutional holders are paid to loan their shares. If you buy EBIX on margin, those are also available to borrow. You, however, can not get paid to loan your shares. Howz that make you feel?Let's keep watching, but this can gap down to the mid $8s, with one more short attack in the future that takes it back to the $5s, which is where Gotham says it belongs. Can I say "bastards!" on MF?
There's a small amount of commentary in a 'Comments' section of the Bloomberg article I read regarding today's Ebix stock drop. Someone named Robert said:"It is most unfortunate that these so-called reporters were so quick to sully the name Bloomberg by writing an article based on claptrap from a new research outfit that registered a domain name just a few days before posting their one and only research report."My question is this, was any due diligence done by the media regarding Gotham City Research? (Holy metro, Batman!) Is GCR in fact simply a quickie made-up research outfit with, as quoted, "Just one research report to their name"?Here's a link to the article, and its associated commentary: http://www.bloomberg.com/news/2013-02-21/ebix-drops-after-re....
Excellent point, Varlot. I spent some time trying to find out who this outfit is. The principle of Gotham is not listed as "Bruce Wayne," but Daniel Wayne. He suggests he knows personally the Craig Hallum people. I thought it would be fun to find out if Craig Hallum knows Mr Wayne. I have e-mailed Craig Hallum to ask. If I get a response, I'll let you all know.On another relevant note, is it possible that the Singapore loan is part of a Dutch Sandwich or Double Irish type tax scheme? Anybody on this board sophisticated enough to have an opinion on that?I still think that the share price action will mirror the attacks of the past. EBIX issued a statement regarding the Gotham report and it was pretty tepid. I'm going to sit on my hands and wait for some clarity.-Randy
Watched this kurfuffle for a bit, unable to get to the meat of the issue from any of the sources or commentary: ie the substance of the "revelations" true or not? Seems to be speculation on the strength of who knows who and rep rather than on the strength of fact. I read enough of the Gotham report to conclude there is detail to the charges that could be checked out by someone who knows EBIX and knows more accounting than me. Any indication this has been done?
I read enough of the Gotham report to conclude there is detail to the charges that could be checked out by someone who knows EBIX and knows more accounting than me. Any indication this has been done?There has been some work done in the past day or two within TMF subscription services that have recommended Ebix. Without providing specific data that might compromise the pay wall, I think I can report that one TMF analyst found pre-tax profit margins greater than 100 percent for Ebix's foreign entities during the most recently reported three years running.A profit margin of 100 percent, of course, means you sell something for $10 and the profit is $10. You have sold something that cost you nothing to produce or provide. This is quite a trick.A profit margin greater than 100 percent generally requires extraneous, non-operational, one-time contributors. Sustained profit margins greater than 100 percent are odd and may confirm Gotham's charge that Ebix's geographic distribution of pre-tax profits is not consistent with the geographic distribution of its actual operations and revenues. In other words, it may be moving profits overseas in an effort to game the U.S. tax system. This might explain the $68.5 million "loan" to its Singapore sub that Gotham focused on.Whether it's done anything illegal or improper, I have no idea. According to Bloomberg, a preliminary investigation by the SEC's Atlanta office is continuing. If you are into reading tea leaves, Ebix's response to the Gotham report seemed quite timid, claiming only that Ebix management "believes that to the best of its knowledge" all its reporting is kosher. The inclusion of the "to the best of its knowledge" caveat suggests a lawyer wanted an out in case management's belief turns out to be false.Unless you are an accountant trained in the areas of serial acquisitions and foreign operations, I'm not sure how you would evaluate the current state of the risk/reward profile here. If the SEC finds reasons to proceed with a formal investigation, it may get worse before it gets better. If it doesn't, the stock price seems likely to recover at some point.
Thanks Appreciate your update here. We know EBIX had moved its IP to offshore and paying royalty on the IP to those tax-advantaged entities. But as you mentioned EBIX response is not confident building.I was almost about to sell on $19 and did some tea leaves reading (AKA chart staring) and thought we can get to $22, greed had blindsided and made my lose the discipline of selling. then I didn't want to sell on the news breakout and wanted to understand.Clearly this is a riksy bet and position control and tight management are required.
In other words, it may be moving profits overseas in an effort to game the U.S. tax system. This might explain the $68.5 million "loan" to its Singapore sub that Gotham focused on.Thanks, Spinach. This is the essence of the Dutch Sandwich or Double Irish scheme. Perhaps there is also a "Singapore Sling." They are not illegal. But the need to be an accounting wizard to unravel them is why these short attackers can make a case that something untoward is going on. Who is really capable of arguing? The SEC may be investigating, but if they find out it's a legal tax avoidance deal, there isn't anything that they can or will do.All that said, there is nothing that is going to prevent another short attack. If the shares settle at $12 and move up to $15...boom, $8-13 range...then boom again to the $5-9 range. Until the situation is fully explained and cleared, short attacks are not only a risk, but you can say with some confidence that they are likely. That's as clear as today's share price.Randy
You were not wrong in your reading of the chart, CM. The charts right now, if viewed in a vacuum make no sense at all. It's when you know what we know that the charts make sense, and that sense is that there are too many "investors" too unwilling to take a risk position. The stock should have moved toward $30, but the short attacks have been successful. You are not the victim of your own greed but the victim of whoever Gotham and Copperfield, et al really are.I stand by my earlier assertion that Gotham and Copperfield are shams. I would not be at all surprised to find that someone within Craig Hallum is colluding. What they are doing is not illegal. It's unethical, but it's not illegal. Can I say "bastards" (again) on this board?At some point, the short attacks will stop for one reason or another. That will be the time to buy in. Assuming that Raina is honest, we have a $25-$30 company that will be had for $5-$15. Charts won't show us any of that.-Randy, standing by.
I do not know EBIX's business well enough or enough fancy accounting (I stick to plain vanilla) to determine if the parallels to ENRON are rational. I knew enough about ENRON's basic business and self-dealing transactions to be suspicious and wary before the insider gave up the details. This has the appearance of similar related party transactions and ethics and honesty are ALWAYS an issue. Legal tax maneuvers or no, it takes a powerful lot of control and restraint to go up to the line but not over....I don't own EBIX yet, and would like to under 12...but not if the books are cooked or the management is vulnerable to pushing the limits with shareholders. I was always struck by one comment of author who wrote about Bernie Maddoff (forget which one)... he said he had little sympathy for Bernie's investors because they knew full well he implied his hedge fund profits came from front running the trades in his brokerage business, and while they stood to benefit from Bernies illegal and unethical activities, it wasn't THEIR illegalities, so it was ok, But then they were shocked Bernie had the temerity to hoodwink them.....
Maybe this will make us feel better, since Skep brings up Enron...If Robin Raina bald faced lied about this, he will go to jail. I'm sure he is aware of that. It's one more reason why there is (probably) nothing to this. Penalties are much more severe and certain since the Enron days. On the other hand, we can be very certain he'll go to jail because other lying book-cooking cheaters have recently gone to jail...which means jail is not necessarily a deterrent...just sayin'...
OK, but I'd rather avoid being caught in the downdraft than chortle over Robin R's jail sentence.... The threat of jail didn't stop Bernie M and I doubt it will stop the next guy that is so inclined. The more likely scenario is the frog in warm water... in for a pinch then more, then more, finally too desperate to do anything but major fraud...you know the rest. All to common.. just sayin'
OK, but I'd rather avoid being caught in the downdraft than chortle over Robin R's jail sentence.... The threat of jail didn't stop Bernie M and I doubt it will stop the next guy that is so inclined. The more likely scenario is the frog in warm water... in for a pinch then more, then more, finally too desperate to do anything but major fraud...you know the rest. All to common.. just sayin' just sayin' the long, the short, and the whole dealy of it, ye are there!
Sigh ... this is what I find so despicable about what has happened the past week.As of yet, nothing negative has been proven, but we're already discussing potential analogies to Enron and Madoff. The Gotham 'report' and the Copperfield report are analogous to the infamous 'when did you stop beating your wife' question? The accusation doesn't need to have merit, just sew doubt. So suddenly we hear reasonable people speculating about whether they'll be an SEC investigation because ... well, 'boy these things sound pretty serious. And hey, I have no clue what the tax laws are in Singapore, but this doesn't smell right to me.'Here's what we do know. We know that some time ago an anonymous group named Copperfield research released a damning report during the quiet period which made EBIX management sound like a cross between Madoff and the Enron management. We know that after it was released a lot of people were mentioning possible comparisons to Enron and Madoff. We know that people were wondering when the SEC would get involved. We know that people were saying 'gee, I don't really understand all this stuff, but boy this doesn't sound good.' And we know, in the end, that the anonymous Copperfield Research report turned out to be a worthless document that was completely discredited.What else do we know? We know the same thing has happened again. And we're hearing the same doubts, and the same sub plots and reams of discussion subtletly linking Raina with Madoff, and Ebix with Enron.Listen, I don't know if any of this is true. And in the end, my faith in what the facts tell me may be proven completely wrong.But here's what I do know: What I do know is that a pattern of anonymous hit jobs released during the quiet period make me suspicious of the intent of this information. And I know that a lot of very smart people, have put a lot of their hard earned money behind this company for a reason: they believe. After all, Copperfield and Gotham have literally handed over the 'smoking guns', ... it's not like the brokerage firms need to 'uncover' anything - they just need to take some time to determine whether the facts presented are damning, or unimportant. They've got reams of people who are paid a lot of money to push the numbers and read the laws and figure these things out. And no one, to the best of our knowledge has bailed. In fact, one brokerage house issued an upgrade Friday.So that's where I'm left: I can believe the anonymous guys, or I can believe that Ernst and Young and all these brokerage houses with hundreds of millions of dollars of skin in the game, teams of investigators, and I would think access to the books ... I have to believe they are all naive, uneducated in the intricacies of international tax laws, uninterested in learning whether their investment is about to tank ... or their just plain wrong.I don't think I'm being naive. More important, I don't think they are being naive. Let's see what happens.
Sigh ... this is what I find so despicable about what has happened the past week. As of yet, nothing negative has been proven, In the last week I owned shares of 2 companies that were subject to short attacks. One is Linn Energy and the other is EBIX.In the case of Linn, the company came out with a press release directly addressing the questions raised in the short attack. Almost all analysts (except 1) stood by the company and reaffirmed their ratings, and the company announced their biggest acquisition using stock.The stock price recovered. One of the blogs where the short case was proposed, has openly acknowledging of closing the shorts. BTW, I do believe the shorts have raised few important questions pertaining to long-term. I have used the bounce back to close 1/2 of my position, since my cost basis is bit lower.The other stock is EBIX. The EBIX press release is pathetic. The shorts have done some homework and put a detailed case. At the least the company should have answered bit more detailed on the questions raised. They should have put their CEO (I don't think anyone else is allowed to talk in public) on either CNBC or Bloomberg. No they didn't do any of it and issued a statement, worded lawyerly to cover themselves in future.I knew EBIX is a high risk stock and wasn't holding any high opinion of the management (aka CEO). They haven't done anything to change that. I will soon close my position and probably will not look back until there is a management change.The management, board of directors are representing the shareholders. If you don't trust them then it doesn't matter how great the prospects are, we should move on. I am not an activist shareholder, or someone who can force management to change. So the only option I have is not to be invested in these circumstances.
So, let me see if I can summarize what FACTS are known for the two alternate cases:1. EBIX is vulnerable to short attacks both by history and by small number of outstanding shares (relatively) plus high institutional ownership. The historical short attacks involved unsubstantiated accounting sins, previously discredited, but profitable to the attackers. The current attack looks similar, may or may not be related to the first attack, and contains specific details some as yet unknown party with the proper knowledge and resources will check and eventually discredit. BUT the odds are this is a repeat.2. EBIX is pressing the limits of arcane and novel? accounting tax treatments for international operations, or may have stepped over the line. Disclosures of researchers with no real reputation have some credibility because of their specificity and detail. Some of the accounting flaws suggested would seriously confuse or maybe compromise EBIX so far good financial results at best, and at worst run the company afoul of the SEC and other legal pitfalls. There has not yet been a serious and well executed fact check of the "charges" and the EBIX issued press release was generic with no specific answers to the accounting flaws "exposed".Do I have that about right?
Part of the reason I find this fascinating is I am considering a buy on panic drop. Part of the reason is I just love a good mystery when its a real life conundrum.
EBIX is vulnerable to short attacks both by history and by small number of outstanding shares (relatively) plus high institutional ownership.The company's financial and accounting practices are the main cause and not the causes you mentioned.BUT the odds are this is a repeat.How and why?There has not yet been a serious and well executed fact check of the "charges"The company can refute the charges with facts. But they didn't? Why?I think you are in denial. Short seller is not evil, just like someone buying and driving the price is "Good". Both are motivated to make money and react based on their understanding of the company fundamentals. - Has the company answered those questions effectively? - Are their misfacts, lie's in the short attack you disagree with?- Your inability to understand international accounting doesn't mean the shorts are wrong.- Given the periodic short-attacks based on financial and accounting practices, Why the company is not engaging one of the big-four auditing firms? - The company uses internally build system for financial record keeping. Most companies (including software/ IT firms) use established products like Oracle Financials etc. Why is the company not making that move (agreed it will cost at least few millions to migrate).- What is the credibility of the board?- What is the bench strength of the management?These are important questions that deserve answers. I am not saying EBIX is fraud or anything like that. However, the trust of the investors are low on the management. The company is not bothered about it.I have opened a small position to track the company closely sometime back. But I will close and move because at this time I have zero trust on the management.
So... your opinion is that Alternative Case #2 in my post is the most likely, and you expect that some kind of malfeasance or press the limit management will eventually be proved out by the facts. Or, are you believing that it does not matter if the short attacks are unfounded and incompetent, because EBIX management has proven itself incapable and inept at defending itself from short attacks?I'm really not denying anything, simply looking for the most rational explanation of "fuzzy facts" before I open a position in EBIX with haste, in order to regret it at leisure.
To me at this point, it is not about whether the shorts are correct or not, but it is about whether I trust the management. I don't.Even if it is a great company with great potential, if you cannot trust the management, then why bother?
To me at this point, it is not about whether the shorts are correct or not, but it is about whether I trust the management. I don't.Even if it is a great company with great potential, if you cannot trust the management, then why bother? CM is right on this...#1- always consider first the reasons not to buy a particular stock and #2- paramount is management quality. In the end, it's management that makes or breaks a company.The fact that EBIX remains vulnerable to short attacks is keeping me from re-establishing a position. I've taken two relatively small losses so far, which I am certain will prove to be the most profitable long run attitude, whether EBIX is forced out of business or returns to the high $20s. #3- we never need to be in a hurry to buy.-Randy, who nevertheless remains ready to buy; in the absence of further hard information, EBIX remains a $30 stock vulnerable to short attacks that will take the share price much lower than it is now.
According to this news item, Ebix plans to respond to the recent controversies:http://www.dailyfinance.com/rtn/pr/ebix-to-attend-analyst-ca...
From the looks of it at this moment, a lot of the shorts are covering. If Ebix can address the concerns pretty well on the call, we could be back up to $18 in a heartbeat.
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