EBIX - Ebix Inc

[ItsAValueTrap]

Isn't selling to GS the ultimate cash out?

As I understood it, Raina would retain his shares.  So he wouldn't have been selling his shares.  On the other hand, if you were running a fraud, selling to private equity could make sense.  You can quietly unwind the fraud and "uncook" your books without having to deal with being audited because you're a public company.  Then blame your problems on the bad economy or whatever.  Sam Antar writes on his website that Crazy Eddie was going to do that.

 

I think that it's hard to tell if this company is a fraud without auditing them yourself.  The short sellers may be exaggerating their "evidence" of fraud.  On the other hand, Raina strikes me as unethical... so this is not a long for me.

[Guest wellmont]

If insiders knew that it is fraud, why would they not sell.

Insiders have not sold much.They are still holding the shares.

Insiders in growth companies constantly sell but that is not the case here.

They have the most to lose.

If it goes to zero, Robin Raina loses the most.

Ebix has paid for acquisitions mostly with cash.They spent 100m on buyback.

You can fake Income statements and earnings, but how do you create cash.

 

 

 

 

Isn't selling to GS the ultimate cash out?  Instead of selling shares piece-meal why not sell all at once?

 

I have no clue if this is a fraud, all I know is I've read some of the articles that point out inaccuracies and some of the statements, and there are way too many red flags to invest.  There are MANY companies just as cheap without the same accusations, I would go for something cheap and clean, why bother with potential fraud?

 

 

CEO was rolling over all his equity

 

 

that he got for free. after taking out millions already. he was using the house's money.

[Liberty]

that he got for free. after taking out millions already. he was using the house's money.

 

AFAIK he bought most of his shares with his own money when he took control over a decade ago, though his average cost is very low compared to (even) today's prices. he also spent half a million of his own money a year or two ago on buying in the public market.

[SFValue]

If insiders knew that it is fraud, why would they not sell.

Insiders have not sold much.They are still holding the shares.

Insiders in growth companies constantly sell but that is not the case here.

They have the most to lose.

If it goes to zero, Robin Raina loses the most.

Ebix has paid for acquisitions mostly with cash.They spent 100m on buyback.

You can fake Income statements and earnings, but how do you create cash.

 

Isn't selling to GS the ultimate cash out?  Instead of selling shares piece-meal why not sell all at once?

 

I have no clue if this is a fraud, all I know is I've read some of the articles that point out inaccuracies and some of the statements, and there are way too many red flags to invest.  There are MANY companies just as cheap without the same accusations, I would go for something cheap and clean, why bother with potential fraud?

 

exactly. why fly that close to the sun. there is enough zany stuff going on that you would have to be nuts to get involved with this guy.

 

 

thats precisely why it is/was miss priced....

 

which direction? I don't know, thought GS found out initially.....

 

this used to be a penny stock not that long ago. ceo has a bunch of penny priced stock options and he got the stock up to $18 by rolling up a bunch of software companies. he also takes home large compensation for a company this size. note he came up through the ranks as salesman.

 

agree, red flags everywhere....

 

BUT....are this conclusive?....to me the main issue was the pricing transfer (taxes) issue that is a real risk but at 10 or 12 was priced in (pre deal/public subpoenas days)...now with all this probes the liability is impossible to me to handicap...

 

maybe because I am am not originally from the US I can see/understand a lot of the so called issues as cultural differences (I am not from India), but after the deal and subsequent termination it went into the "too^3 hard pile"

[Guest wellmont]

just go back into the early 2000s and review the 10ks. it's basically a penny stock promotion. it had not one but 2 Reverse stock splits one in 1998 and another in 2002. if it's not a fraud GS would have been holding a very smelly bag.

[Guest wellmont]

that he got for free. after taking out millions already. he was using the house's money.

 

AFAIK he bought most of his shares with his own money when he took control over a decade ago, though his average cost is very low compared to (even) today's prices.

 

he owns 3.7m shares. he sold 500k last year when taxes were lower. below seems to suggest most of his shares were granted to him.

 

Mr. Raina’s ownership includes (a) 198,825 shares of restricted stock, (b) 1,440,000 shares of our common stock which are exercisable as of September 27, 2012, or that will become exercisable within 60 days after that date, and © 217,064 shares held as trustee for Robin Raina Foundation a 501© charity ownership which were donated by Robin Raina from vested restricted stock grants previously issued to Mr. Raina by the Company and, to which Mr. Raina disclaims any beneficial ownership. The Federal Tax ID Number for the foundation is 51-0497387. The address of Mr. Raina is 5 Concourse Parkway, Suite 3200, Atlanta, Georgia 30328.

[ItsAValueTrap]

Yes but sometimes these shady penny stock promotions can amount to something.  (I don't know if EBIX started out that way as I haven't done my research.)

 

http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/381

 

 

[CONeal]

"

Be fearful of what the regulators know - We have provided regulators with additional information that has yet to be publicly disseminated, and we will likely continue to aid in their efforts. Gotham City Research has no obligation to share our additional findings with the public. You should assume that its materiality equals, if not exceeds, what we've published so far. You should not assume Ebix's cash position is necessarily as they portray.

 

Source: Ebix Worth No More Than $8, Likely Headed To $0

"

 

This is the part I don't understand.  If your short and providing information to the gov't isn't that insider trading?  It seems like all these lawsuits are being initiated by someone so they can make a buck.  Is everything they pass along just bs so they can win just on the news being released (which they are doing)? 

 

Does EBIX even know what has been realsed to the gov't?

[Guest wellmont]

(14) The address of the Rennes Foundation is Rätikonerstrasse 13, P.O. Box 125, 9490 Vaduz, Principality of Liechtenstein.

[ItsAValueTrap]

If your short and providing information to the gov't isn't that insider trading?

Doing 'detective' work on a company isn't considered insider trading.  The short sellers in question have never worked for Ebix so they don't hold any inside information.

 

Some countries have weird insider trading laws though... the wikipedia article on insider trading covers that.  In some counties, you can be considered to have inside information even if you don't work for the company or do business with them.

[Guest wellmont]

Alpha

I could not agree more with you. Robin has everything to gain and nothing to lose.HE will get tons of stock options in the new capital structure and he can show the performance he will have bigger share of equity.

GS will probably sell it or do a IPO in 3-5 years and Robin will get all the gains.

Meanwhile Robin does not have to worry about analysts,shorts,investors and SEC.

 

he may have to worry about Lavar in the next bunk, however.

[Guest wellmont]

there were no value investors in the stock. fidelity, blackrock, vanguard, bmo financial group.

[siddharth18]

"

Be fearful of what the regulators know - We have provided regulators with additional information that has yet to be publicly disseminated, and we will likely continue to aid in their efforts. Gotham City Research has no obligation to share our additional findings with the public. You should assume that its materiality equals, if not exceeds, what we've published so far. You should not assume Ebix's cash position is necessarily as they portray.

 

Source: Ebix Worth No More Than $8, Likely Headed To $0

"

 

This is the part I don't understand.  If your short and providing information to the gov't isn't that insider trading?  It seems like all these lawsuits are being initiated by someone so they can make a buck.  Is everything they pass along just bs so they can win just on the news being released (which they are doing)? 

 

Does EBIX even know what has been realsed to the gov't?

What I don't understand is why they would they share something with government and withhold from the public? If they are short and wish to inflict maximum damage, why would they pull any punches? Unless of course it's just a boogeyman that wants us to "be fearful of what the regulators know."

 

 

Regarding "You should not assume Ebix's cash position is necessarily as they portray." That's saying they are faking their cash on their Balance Sheet.

[Guest wellmont]

 

Regarding "You should not assume Ebix's cash position is necessarily as they portray." That's saying they are faking their cash on their Balance Sheet.

 

yes that's what frauds do. they FAKE the cash on the balance sheet.

[Parsad]

"

Be fearful of what the regulators know - We have provided regulators with additional information that has yet to be publicly disseminated, and we will likely continue to aid in their efforts. Gotham City Research has no obligation to share our additional findings with the public. You should assume that its materiality equals, if not exceeds, what we've published so far. You should not assume Ebix's cash position is necessarily as they portray.

 

Source: Ebix Worth No More Than $8, Likely Headed To $0

"

 

This is the part I don't understand.  If your short and providing information to the gov't isn't that insider trading?  It seems like all these lawsuits are being initiated by someone so they can make a buck.  Is everything they pass along just bs so they can win just on the news being released (which they are doing)? 

 

Does EBIX even know what has been realsed to the gov't?

What I don't understand is why they would they share something with government and withhold from the public? If they are short and wish to inflict maximum damage, why would they pull any punches? Unless of course it's just a boogeyman that wants us to "be fearful of what the regulators know."

 

 

Regarding "You should not assume Ebix's cash position is necessarily as they portray." That's saying they are faking their cash on their Balance Sheet.

 

Yes, this is why in an earlier post I said that they are straddling an unethical line here.  This was simply an article to bash the stock further...pure and simple!

 

We have more details that make this company a fraud, so don't buy the stock...we just can't tell you what those details are.  Oh yeah, and their cash isn't real either, but you didn't hear that from us...nudge, nudge, wink, wink! 

 

Just have some balls and go out into the public and show your damn face and say what you have to say.  At least when Chanos was calling Fairfax a fraud, he stood there like an idiot on stage and said so, rather than hiding behind a website.  These guys may be right, but I have no respect for guys hiding in the shadow whispering, while still reaping a profit from the demise of a company.  Cheers!

[twacowfca]

"

Be fearful of what the regulators know - We have provided regulators with additional information that has yet to be publicly disseminated, and we will likely continue to aid in their efforts. Gotham City Research has no obligation to share our additional findings with the public. You should assume that its materiality equals, if not exceeds, what we've published so far. You should not assume Ebix's cash position is necessarily as they portray.

 

Source: Ebix Worth No More Than $8, Likely Headed To $0

"

 

This is the part I don't understand.  If your short and providing information to the gov't isn't that insider trading?  It seems like all these lawsuits are being initiated by someone so they can make a buck.  Is everything they pass along just bs so they can win just on the news being released (which they are doing)? 

 

Does EBIX even know what has been realsed to the gov't?

 

How much of their cash is held by their overseas businesses?  Could there be questions about whether the money is really there or if such funds may be held in escrow against contingent or undisclosed liabilities?

 

It would be sad if overseas assets were overstated or liabilities understated.

[Edward]

yes that's what frauds do. they FAKE the cash on the balance sheet.

They barely have cash on the balance sheet relative to MCap or FCF. That's not the point really. The point is whether FCF is real or not.

 

Looking at the companies they bought over the years (using cash), that is quite a lot of cash. That would be hard to fake vs most cases of rollups where they use stock to buy other companies. Then you really can't verify whether FCF is real or not.

 

Here is a writeup on SA on the supposed rollup strategy of the company.

http://seekingalpha.com/article/1095511-understanding-ebix-s-growth-strategy

 

If I read it correctly, they spent 277M$ in cash between 2006-2011 buying companies. If this is a fraud, where do you suppose this money came from?

 

They didn't really issue much stock or debt. Any option other than cash from operations?

[Guest wellmont]

yes that's what frauds do. they FAKE the cash on the balance sheet.

They barely have cash on the balance sheet relative to MCap or FCF. That's not the point really. The point is whether FCF is real or not.

 

Looking at the companies they bought over the years (using cash), that is quite a lot of cash. That would be hard to fake vs most cases of rollups where they use stock to buy other companies. Then you really can't verify whether FCF is real or not.

 

Here is a writeup on SA on the supposed rollup strategy of the company.

http://seekingalpha.com/article/1095511-understanding-ebix-s-growth-strategy

 

If I read it correctly, they spent 277M$ in cash between 2006-2011 buying companies. If this is a fraud, where do you suppose this money came from?

 

They didn't really issue much stock or debt. Any option other than cash from operations?

 

how much stock and debt Did they issue? you're pretty vague on that. I know they have 3m more shares out now than they did 3 years ago. I can't believe all those companies they rolled up are quality companies. I am not saying it's a fraud. I am saying I would not go near this thing with Your money. It just stinks. It's a scam. how much has the CEO taken out the company since he got there in the mid 90s?

[Guest wellmont]

red flag #114

 

Most of the companies that EBIX acquired had little or no profit.

[mankap]

Here is how Ebix used cash in past

Paid $277m in cash for acquisitions

Bought back shares worth $100m

Ebix Pays dividend of >$10m/year

 

That is around $400m.

Where is the cash coming from.

It is coming from FCF.

 

[Guest wellmont]

Here is how Ebix used cash in past

Paid $277m in cash for acquisitions

Bought back shares worth $100m

Ebix Pays dividend of >$10m/year

 

That is around $400m.

Where is the cash coming from.

It is coming from FCF.

 

yet shares outstanding are 3m higher now than 3 years ago. why would that be if they bought back $100m of stock?  because they pay no taxes and they cut half the employees of the acquired company. they don't invest in marketing or r & d. unsustainable strategy that has just come to a grinding halt.

[Edward]

how much stock and debt Did they issue? you're pretty vague on that.

I'll come with some exact figures directly from the various 10-K's tomorrow. Meanwhile, I just took a look at Morningstar - between 2006-2011:

 

Cash from common stock issued: 34M$

 

Cash from debt issued: 16M$

 

Total: 50M$

 

Cash used for investing activities: (188)M$

 

Cash used to repurchase stock: (101)M$

 

Just a quick and dirty look at morningstar, not the 10-K's.

 

I know they have 3m more shares out now than they did 3 years ago.

Looks about the same amount on morningstar, but I'll verify tomorrow. They did issue some between 2006-2010, which seems to increase share count from 25 to 35 mil. (from morningstar again). It pretty much makes sense with the 34M$ cash from stock issued in the period and the fact that some was from employee options. It doesn't seem to ring any alarm bells for me.

 

I can't believe that all those companies are quality companies.

Probably not. Doesn't matter.

 

I am saying I would not go near this thing with Your money. It just stinks. It's a scam. how much has the CEO taken out the company since he got there in the mid 90s?

 

Maybe it is a fraud, but boy if it is it's a good one.

 

No idea about total salary etc. over the years, will check tomorrow.

 

red flag #114

 

Most of the companies that EBIX acquired had little or no profit.

Erm.... you are aware of course that a lot of the time they acquired companies not for access to their client base and not for their FCF as a standalone.

 

Sure, could be a red flag in some cases. With software companies, it's really hard to say it is either way.

[Guest wellmont]

I don't know of a strategy of buying companies that don't make money ever working (and then magically turning them into companies that do). who does that? it just lacks common sense.

[twacowfca]

Clarification requested.

 

Last fall in early November, the statement from the short seller came out, stating that they were being investigated by the US Attorney in Atlanta.  Within a few days, Raina and EBIX issued a statement that that was untrue: that they had received no letter or other indication that they were being investigated

 

Recently, I think it came out that the US Attorney did send them a letter in late November, 2012 that they were investigating them.

 

My question is this: Did EBIX make that fact known immediately after they received that letter?

[Edward]

yet shares outstanding are 3m higher now than 3 years ago. why would that be if they bought back $100m of stock? 

I actually took a look. shares outstanding are about 2m more in Q12013 vs Q12010.

 

From the 2012 10-K it looks that during 2010-2012, the following happened (slightly rounded figures):

 

started: 34.5M shares.

 

around 3M of stock options exercised and deferred stock vested.

 

almost 4m issued to acquire businesses.

 

around 5m repurchased (hence the 100m in cash for repurchases)

 

around 0.7m were converted from bonds to stock.

 

end of 2012 number: 37m shares.

 

 

Conclusion: still can't see the problem here.

 

 

  because they pay no taxes and they cut half the employees of the acquired company.

Yeah.... so? (they do pay a bit of taxes, 10-12% rate projected forward)

 

 

  they don't invest in marketing or r & d.

Wrong. Open a P&L man.

 

Around 40M$ in R&D and marketing expenses in 2012.

 

I don't know of a strategy of buying companies that don't make money ever working (and then magically turning them into companies that do). who does that? it just lacks common sense.

You use their client relations(that you just acquired) to get your own business to make money by offering them your pre-existing product. Then you make money.

 

No one said that these acquisitions necessarily make any money from their former products as stand-alones.