EBIX - Ebix Inc

[CONeal]

Ebix mentioned on the call that they plan to explore legal avenues due to these sorts of attacks.  Wondering if they really have something to stand on?  Sure its a pain in the ass when this happens.  As with Fairfax and Overstock nothing really occurs to hold the people that write these articles accountable.

[mankap]

Some posters on yahoo MB have identified the writer of Gotham report as ' Daniel Yu'.He has been short on many stocks. He was short on GMCR and followed Einhorn. GMCR has almost doubled since he shorted.

 

[siddharth18]

Sure its a pain in the ass when this happens.

 

Why? Assuming they are fully confident of their actions and that they have nothing to hide, shouldn't EBIX (and, by extension, EBIX's long term shareholders) cheer for such temporary aberrations?

 

Warren Buffett said in his 2011 Annual Letter about this, albeit on a completely different stock (IBM). The common theme was that both IBM and EBIX have impending buybacks and a dip in price creates a golden opportunity to boost the intrinsic value.

 

http://i.imgur.com/KDVJ6gS.png

[CONeal]

Sure its a pain in the ass when this happens.

 

Why? Assuming they are fully confident of their actions and that they have nothing to hide, shouldn't EBIX (and, by extension, EBIX's long term shareholders) cheer for such temporary aberrations?

 

Warren Buffett said in his 2011 Annual Letter about this, albeit on a completely different stock (IBM). The common theme was that both IBM and EBIX have impending buybacks and a dip in price creates a golden opportunity to boost the intrinsic value.

 

http://i.imgur.com/KDVJ6gS.png

 

Yes most pf the time a drop in share price is good for loading up on a stock.  However, the constant negativity is also probably keeping investors away.  On top of that there really wasn't much left in Ebix buyback when this occurred so it's not like they had the ability to retire 10% -20% of the outstanding shares the last couple of days.

[LC]

Ebix mentioned on the call that they plan to explore legal avenues due to these sorts of attacks.  Wondering if they really have something to stand on?  Sure its a pain in the ass when this happens.  As with Fairfax and Overstock nothing really occurs to hold the people that write these articles accountable.

Accountable for what? Lowering my cost basis, or exercising their freedom of speech? The analysis was reasonable and legal. If shareholders examine the facts and side with Gotham Capital, that is their right!

[Martian]

Ebix mentioned on the call that they plan to explore legal avenues due to these sorts of attacks.  Wondering if they really have something to stand on?  Sure its a pain in the ass when this happens.  As with Fairfax and Overstock nothing really occurs to hold the people that write these articles accountable.

Accountable for what? Lowering my cost basis, or exercising their freedom of speech? The analysis was reasonable and legal. If shareholders examine the facts and side with Gotham Capital, that is their right!

 

I think if somebody can write a bull case and make the stock go up, somebody else can write a bear case and make the stock go down. I think that is fair. Buffett always said that he will pay somebody who can make the stocks go down 50%. He also dared others to short Berkshire if they can.

 

If anybody wants to hear point by point rebuttal, it is available at

U.S./Canada: 888-899-7904

Playback ID: 132723057

 

The summary is that

-the  65 million is a inter-company transaction with no third party involved,

- the discrepancies in numbers between Singapore, India  and US is because of different local standards,

- the 2 million number regarding charity is about revenue not expenses,

- the long lived assets in 2011 were the same as 2010 just that it was consolidated with goodwill etc.,

 

He quoted the relevant press releases for each issue.

[mankap]

I think we will see more buyback in near future.

If the FCF is intact and Ebix uses it for shareholders ( dividend ,buyback and increase FCF/share by acquisition) shorts will eventually go away.

[CONeal]

Ebix mentioned on the call that they plan to explore legal avenues due to these sorts of attacks.  Wondering if they really have something to stand on?  Sure its a pain in the ass when this happens.  As with Fairfax and Overstock nothing really occurs to hold the people that write these articles accountable.

Accountable for what? Lowering my cost basis, or exercising their freedom of speech? The analysis was reasonable and legal. If shareholders examine the facts and side with Gotham Capital, that is their right!

 

Freedom of speech does has its limits.  I'm no lawyer and really don't know of the merits of the two lawsuits referenced above other then the two compaies had to have a reason to bring the suits to court. 

 

[LongTerm]

Ebix mentioned on the call that they plan to explore legal avenues due to these sorts of attacks.  Wondering if they really have something to stand on?  Sure its a pain in the ass when this happens.  As with Fairfax and Overstock nothing really occurs to hold the people that write these articles accountable.

Accountable for what? Lowering my cost basis, or exercising their freedom of speech? The analysis was reasonable and legal. If shareholders examine the facts and side with Gotham Capital, that is their right!

 

I think you have to ask yourself two questions.

[*]do we want a stock market that attracts individual investors

[*]do we want a stock market in which certain players manipulate information to the detrement of the operations of public companies

To me it seems the common sense answer to the first is 'yes' and the second is 'no'. The question is how to achieve this while protecting free speech. It's not an easy balance. A market in which a player can load up on put options, then publish a negative article on a stock using half truths, smells of manipulation. Small individual investors who lose money in this kind of environment will eventually abandon equity investing. You may approve of that saying that they have no business investing in the first place if they are not 'sophisticated', but really, the strength of the equity markets in the US over the years has been due to the participation of individual investors. Likewise, a market where damaging the operations of a company through the information manipulation does not appear to me at least to be in the best interest of investors. Companies that depend on market perception to remain in business (e.g. banks, which lend long term and borrow short-term) are particularly vulnerable.

 

Don't get me wrong. I'm not against short selling. I think it serves a valuable function. It's just that a few are tempted to help their thesis with a little extra push. Somehow we need to make sure that 'push' is not unreasonable. To me the extra 'push' that they are trying to apply to Ebix appears unreasonable.

 

Disclosure: I am long EBIX

[LC]

I think you have to ask yourself two questions.

[*]do we want a stock market that attracts individual investors

[*]do we want a stock market in which certain players manipulate information to the detrement of the operations of public companies

To me it seems the common sense answer to the first is 'yes' and the second is 'no'. The question is how to achieve this while protecting free speech. It's not an easy balance. A market in which a player can load up on put options, then publish a negative article on a stock using half truths, smells of manipulation. Small individual investors who lose money in this kind of environment will eventually abandon equity investing. You may approve of that saying that they have no business investing in the first place if they are not 'sophisticated', but really, the strength of the equity markets in the US over the years has been due to the participation of individual investors. Likewise, a market where damaging the operations of a company through the information manipulation does not appear to me at least to be in the best interest of investors. Companies that depend on market perception to remain in business (e.g. banks, which lend long term and borrow short-term) are particularly vulnerable.

 

Don't get me wrong. I'm not against short selling. I think it serves a valuable function. It's just that a few are tempted to help their thesis with a little extra push. Somehow we need to make sure that 'push' is not unreasonable. To me the extra 'push' that they are trying to apply to Ebix appears unreasonable.

 

Disclosure: I am long EBIX

 

You're absolutely right in that there is most certainly the potential to manipulate the market in this fashion. I wish it never happened, either. But what is the solution?

 

Let's say Ebix undergoes a full investigation by the SEC, and comes out sparkling clean. Is Gotham Capital now financially responsible for something? Is that a precedent that should be set? What if they were just wrong?

 

Then again, should we allow people to commit libel? Absolutely not.

 

There is definitely a line, and I think we should hold these types of issues to the same standard we hold newspapers.

 

That being said, retail investors get burned because they can't stomach 50% unrealized losses. Charlie Munger had a comment about that, though.

[Liberty]

If anybody wants to hear point by point rebuttal, it is available at

U.S./Canada: 888-899-7904

Playback ID: 132723057

 

 

Finally getting a chance to listen to this. Makes a lot of sense to me, as expected.

 

Sad what these manipulators are doing. One could go through filings of almost any complicated company and write a short report that cherry picks and distorts info to make things look bad, and that's basically what has been done apparently. It's easier with EBIX because they are unconventional and unpolished with PR, so superficial investors who only take a closer look when there's a crisis like this can be more easily confused and made to feel like something might be wrong.

[indythinker85]

Some posters on yahoo MB have identified the writer of Gotham report as ' Daniel Yu'.He has been short on many stocks. He was short on GMCR and followed Einhorn. GMCR has almost doubled since he shorted.

 

I have no position in EBIX never did, nor will i judge ethics here. But I spoke to some people about EBIX and im 99% sure the firm is not run by Daniel Yu. I also heard the firm not pump and dump, but legit researchers. I have no idea if they are correct, but my understanding is that they do same thing as Muddy Waters or any of those other firms. Nothing illegal as far as I know, although I won't get into the debate about whether the tactics are ethical.

[Edward]

. I also heard the firm not pump and dump, but legit researchers. I have no idea if they are correct, but my understanding is that they do same thing as Muddy Waters or any of those other firms. Nothing illegal as far as I know, although I won't get into the debate about whether the tactics are ethical.

Assuming this is the case, why would they hide behind anonymity, and only incorporate + put up a website a few weeks before the report is published? No legit researcher I've ever heard of does this kind of shenanigans.

 

Muddy waters have had a presence for the past 3 years so you can follow their past research, and Carson Block is out there as corporate face. Plus they do not use disrespectful language in their reports. I wouldn't compare Gotham to Muddy waters on any level.

[Liberty]

Round 2 from Gotham: http://seekingalpha.com/article/1255141-ebix-all-distraction-no-clarity

[bargainman]

"We stand by all the opinions stated in our prior report. Raina's inaccurate statements, irrelevant story-telling, and lies of omission only serve to strengthen our beliefs."

 

We, the anonymous internet poster, stand by all the opinions.

 

What a bunch of hypocrites.  If they stand by their report they should stand by their report.

[LongTerm]

Round 2 from Gotham: http://seekingalpha.com/article/1255141-ebix-all-distraction-no-clarity

 

Interesting that the shares didn't budge today. I guess all those afraid the short thesis would decimate the stock sold last time around and there's nobody left that can be 'scared' out of the stock.

 

It is kind of pitiful that the Gotham City Research has to hide behind anonymity and that Seeking Alpha abets such behavior.

[Josh4580]

Great responses in the comments section of the new short report:

Regarding the Singapore/Australia related party loan not reflected correctly in the Australian accounts.

 

Australian accounts only became fully consolidated in 2011. For 2009 you need to pull the EbixExchange Australia Pty Ltd Sub to see the cash flows which isn't available from ASIC.

 

Here is the 2011 and 2009 Cashflow statement pages. Note how for 2011/2010 it show consolidated entity and parent entity but for 2009 it doesn't. That can be further confirmed in the directors report of 2011 accounts.

 

Ebix AU CF 2011 - http://bit.ly/14z87TG

 

Ebix AU CF 2009 - http://bit.ly/YEi94Z

 

No, Gotham, you are actually incorrect and continue to mislead with erroneous factual references.

 

I have the Australian filings.

 

Yes, the financial notes you directed us to disclose that the Australian parent company owned 100% of the other two entities from at least 2009 forward, but that is irrelevant and not the original commenter's point.

 

The original commenter was referring to accounting consolidation, not legal ownership. And for that we go to Note 1, Summary of Accounting Policies. The 2011 filing clearly states that it for "Ebix Australia (VIC) Pty Ltd and its controlled entities" whereas the earlier filings simply list the parent company only as the subject of the audit.

 

As such, the point still stands that without the filings for the other Australian companies you are merely speculating about 2008 and 2009 based on a limited amount of information.

 

No, full consolidation does matter, very much so. With out EbixExchange Australia Pty Ltd where the transaction occurred in 2009 your argument is based on an incomplete set of unconsolidated transactions at one individual Australian subsidiary and what your seeing at Singapore.

 

The other point I would hi-light is that the transactions don't have to hit the statement of cash-flows.

 

Here is the IFRS accounting standard statement for cashflows on this point:

 

"44. Many investing and financing activities do not have a direct impact on current cash flows although they do affect the capital and asset structure of an enterprise. The exclusion of non-cash transactions from the cash flow statement is consistent with the objective of a cash flow statement as these items do not involve cash flows in the current period. Examples of non-cash transactions are:

 

(a) the acquisition of assets either by assuming directly related liabilities or by means of a finance lease;

 

(b) the acquisition of an enterprise by means of an equity issue, and

 

© the conversion of debt to equity"

 

The ~50MM trade payable and reduction in investments you reference falls into an example of point (a). And this is part of the consolidated Singapore account but not the entire Australian component as Ebix Australia Pty Ltd has the other components of the transactions and is not consolidated.

 

http://bit.ly/YIwYUi

 

So I would hi-light two points here:

1/ Your working off 2009 unconsolidated accounts that miss EbixExchange Australia pty ltd where the transactions occurred with Singapore subsidiary.

 

2/ Your assuming that every asset/liability transaction must have a cash inflow and out flow on the cashflow statement and as shown the accounting standards show that this not the case.

 

I look forward to your 3rd piece.

[LongTerm]

Earnings out. As usual beat analysts' projections. Continued to buy back shares (perhaps they should have waited!)

 

http://finance.yahoo.com/news/ebix-announces-fourth-quarter-full-113000508.html

[Cardboard]

Earnings and cash flow not keeping up with sales growth... Yeah, great beat!

 

I would be very careful being an owner of this thing. Earnings growth looked great a few years back when Harry Long was touting it here. Since then, I can affirm that they have not delivered the earnings that they should be at now. It appears to me that the shorts have had a real point and that Raina had to straighten things up in there explaining why suddenly expenses are higher and despite more acquisitions and some organic growth that earnings are not keeping up with sales anymore. I was expecting that "cleanup" phase to be over when I bought, but this big disclosure miss in 2009 from the Singapore division made me take a big step back.

 

Said differently, I cannot trust the financials from previous years. I thought it was minor, but unsure now. Also, maybe that everything is ok now, maybe, but if there are big adjustments necessary and the SEC is truly involved, then restatements will have to be made and with it a new round of lack of trust.

 

Cardboard

[Liberty]

http://seekingalpha.com/article/1274451-ebix-management-discusses-q4-2012-results-earnings-call-transcript

 

CC transcript. Haven't listened yet, so no opinion either way.

[alpha231616967560]

Earnings and cash flow not keeping up with sales growth... Yeah, great beat!

 

I would be very careful being an owner of this thing. Earnings growth looked great a few years back when Harry Long was touting it here. Since then, I can affirm that they have not delivered the earnings that they should be at now. It appears to me that the shorts have had a real point and that Raina had to straighten things up in there explaining why suddenly expenses are higher and despite more acquisitions and some organic growth that earnings are not keeping up with sales anymore. I was expecting that "cleanup" phase to be over when I bought, but this big disclosure miss in 2009 from the Singapore division made me take a big step back.

 

Said differently, I cannot trust the financials from previous years. I thought it was minor, but unsure now. Also, maybe that everything is ok now, maybe, but if there are big adjustments necessary and the SEC is truly involved, then restatements will have to be made and with it a new round of lack of trust.

 

Cardboard

 

Cardboard - what do you have in mind specifically in terms of not trusting financials and/ or earnings / cash flow? Are you referring to the "Gotham Capital" article? Did you not buy Raina's explanation of the Singapore allegations? Why don't you trust financials? 

 

Seems like EPS and FCF have remained a fairly consistent portion of revenue as compared with 5 years ago. 

 

Cheers

alpha23

[Codycoyote]

I'd like to thank Cardboard for his succinct view of the EBIX report as it helped me resolve what to do with my turbulent shares. His impression that "earnings and cash flow are not keeping up with sales growth" is confirmed quite visibly with a gander at my online bar charts and a quarter-by-quarter percentage indicator in each of those categories. Sales clip along in the 30 percent range while uneven earnings growth has gone stale - generally in the 5 to 8 percent region. And even though it was mild, this quarter's decline in cash flow came as a disappointment as that's always been a positive for the stock.

 

I'm not one who believes in the Gotham Ghoul's scandlous fabrications, and I'm aghast that Seeking Alpha continues to facilitate such market-damaging short attacks by anonymous sources, yet I can't allow my animosity toward those fear-mongers influence my investments.

 

I shaved about a third of my position today around 17.25 and will be looking for opportunities over the next few days to close it out, not because of short-selling fear tactics (I courageously held through a 60-point plunge) but because of this earnings flatness not only for the past six quarters but also projected to continue through the coming fiscal year. I'll consider the shares again in future, perhaps in a year or so, when, hopefully, Ebix will be in position to place less emphasis on acquiring new companies and more emphasis on absorbing the ones it owns into a complementary whole.

 

Nothing else against Ebix particularly, it's a great business line, I've defended its shares vociferously against the attackers, I've taken a liking to Mr. Raina, yet I'm concerned the range we saw today (16 to 17) may continue to bind the shares for another quarter or two to come. I think the market offers shares with better and more stable earnings growth and absent the jaw-dropping shocks to share prices.

[Cardboard]

Alpha23,

 

Basically yes, the Gotham accusation makes me quite nervous. It is a big transfer or inter company loan that has not been disclosed properly. Even if it is all ok via the consolidated statements, I get the feeling that I am not being told as accurately as possible what is going on. Then there is the tax rate gradually going up right after the shorts pointing it out, then it is EBITDA and cash flow no longer keeping pace with sales. The shorts had also pointed out that expenses looked to good to be true.

 

The point about earnings growth is more important than these allegations. I was paying 9 times earnings for a fast grower, using Peter Lynch's language, that was in need of some short term "tuning". However, if EPS are now growing sub 10% longer term then the stock is cheap, but not cheap enough. There are stocks at 5 or 6 times earnings growing EPS at these rates out there with none of the controversy. Of course, I sold the morning of the Gotham story losing only a short term profit, so I did not know what would be the company's response or the latest earnings. Now that the info is out it validated my decision IMO.

 

Cardboard

[Martian]

 

Basically yes, the Gotham accusation makes me quite nervous. It is a big transfer or inter company loan that has not been disclosed properly. Even if it is all ok via the consolidated statements, I get the feeling that I am not being told as accurately as possible what is going on.

I'm not sure  I'm following you. In the conf call, Robin explained about the loan and quoted the relevant SEC filings. He did not come out with any new info. It was all in there already. What makes you nervous?

 

Then there is the tax rate gradually going up right after the shorts pointing it out,

This is a known issue. The India tax credit will expire and the increasing revenue in US will be taxed at normal rate so the tax rate will go up anyway.

then it is EBITDA and cash flow no longer keeping pace with sales. The shorts had also pointed out that expenses looked to good to be true.

They are maintaining the margins close to 40%. As for expenses, I think as a software company the expenses will not grow exponentially.

 

Thanks  !

[Liberty]

http://www.insurancejournal.com/news/international/2013/04/09/287721.htm

 

The Qatar Financial Centre Authority (QFCA) announced that it has reached an agreement to sell Qatarlyst, an electronic trading exchange for the global insurance and reinsurance industry, to Ebix Singapore Pte Limited, a subsidiary of Ebix, Inc., an international supplier of On-Demand software and E-commerce services to the insurance industry.