EBIX - Ebix Inc

[siddharth18]

It turns out the biggest value Raina brings to the table is the ruthless cost-cutting. Numerous employees (http://www.glassdoor.com/Reviews/Ebix-Reviews-E1328.htm) are posing how EBIX won't them them a raise and pays them very poorly and how (after acquisitions) redundant employees are being fired. Raina's ability to outsource the back-end (coding, etc) is also the reason why he is essentially the low cost provider when it comes to insurance CRM business.

 

I contacted some of the existing EBIX clients, many of them that been using EBIX for 5-10 years without so much as a hiccup. Then there are multiple comments on SeekingAlpha from those that claim to have worked in the insurance industry and say EBIX provides a much needed service and insurance companies don't just hand out their CRM business to just anyone, without doing significant due-diligence, because it's a big headache if EBIX vanishes.

 

Then there are some reviews on insurance-forums.net, where users describe how the significant learning curve in using EBIX makes it hard to switch to competitors and why revenue is sticky.

 

Here are some articles regarding EBIX's moat:

 

http://www.insurancenews.com.au/local/ebix-monopoly-comes-under-fire

http://www.dailymarkets.com/stock/2010/07/15/ebix-inc/ (under "High Switching Cost")

 

I think it's reasonably clear that EBIX isn't some fly-by-night company that's a cash-sucking vaccum. Edward did a pretty good job in pointing that out - how else do you explain the source of the excess cash that was used by buybacks and acquisitions and dividends?

 

Besides, was Goldman not aware of all the short claims before wanting the acquisition? Was Credit Suisse not aware of any claims before agreeing to provide financing for this deal? Was Morgan Stanley not aware of any allegations before acting as financial adviser to EBIX? Didn't Citibank/Wells Fargo/RBS not do any due diligence before providing EBIX with line of credit? I think Kraven's analysis on it is spot on:

 

...anything Goldman not only set out to buy, but agreed to buy, would have been diligenced to death.  Their lawyers on this deal were Davis Polk.  They are one of the finest firms in the world and known to be ultra conservative.  The fact that the merger was called off due to the US Attorney probe doesn't surprise me.  Even though it's just a rehash of old claims, Goldman has enough problems as it is.  They don't need to walk into another one.  Truth doesn't matter (I'm not saying the allegations are true or not, I have no idea).  It's all about perception...

 

I feel like IR could do a better job at vigorously defending when they get attacked. Ironically, a former EBIX IR guy, is the one who has been long EBIX since 10 years and has defended the company (http://bit.ly/ZnfXPi and http://bit.ly/15AQGW5)

 

Key risks (defined as permanent loss of capital):

 

-Microsoft lawsuit: I read the motion to dismiss (http://bit.ly/14sHuWA) - it seems the suit isn't about copyright infringement but about breach of license agreement. Most likely settle?

 

-IRS Tax liability: No wrongdoing or tax evasion alleged by IRS, but even if it is, remember that Ebix has $51 million in NOLs.

 

-SEC Probe: SEC has communicated with EBIX in the past and is aware of the allegations. No wrongdoing alleged.

 

-Peak lawsuit: In total plaintiffs are asking for $1.5M?

 

-US Attorney General investigation into "allegations of intentional misconduct brought to its attention by pending shareholder class-action lawsuits." Hmm - Bloomberg and short articles caused lawsuits, lawsuits caused the attorney general investigation.

 

-If something does come up from the attorney general's investigation, the banks could force EBIX to pay the debt/revolver as it would trigger a "default" based on the covenants ( http://1.usa.gov/12jXOAM )- this IMO is the only true risk.

 

-

Notwithstanding all of the above, the person with the most knowledge of EBIX's books is Robin. He has been with the company for 16 years. And he chose to (no only keep his stake) but increase it to 29% even when he was being offered $20/share. Why would he not have taken the money and ran if there indeed were skeletons in the closet? I think he sees potential for a bigger payout, much bigger than just $20/share. Meanwhile, Mr. Market is still depressed and is willing to part with EBIX at $11.5/share.

[mysticdrew]

What just happened to EBIX shares? Dropped like a cliff just now.

[Guest wellmont]

What just happened to EBIX shares? Dropped like a cliff just now.

 

money laundering investigation. who'd thunk it?

[Liberty]

Well, that should make for an interesting conference call on August 9...

[blainehodder]

http://www.bloomberg.com/news/2013-08-06/ebix-said-to-be-reviewed-by-u-s-for-money-laundering.html

 

This is the same guy publishing the article.

[Guest wellmont]

http://www.bloomberg.com/news/2013-08-06/ebix-said-to-be-reviewed-by-u-s-for-money-laundering.html

 

This is the same guy publishing the article.

 

yep. he's been dead right so far.

[Liberty]

340m market cap. That 100m buyback program will sure go a long way if this all turns out to be BS or minor..

[blainehodder]

http://www.bloomberg.com/news/2013-08-06/ebix-said-to-be-reviewed-by-u-s-for-money-laundering.html

 

This is the same guy publishing the article.

 

yep. he's been dead right so far.

 

Dead right about generating unsubstantiated rumours?

[Guest wellmont]

Dead right about generating unsubstantiated rumours?

 

all his stuff was well researched. besides you don't even need his reports to see this thing stinks. you just had to read the bloomberg article. most of the stuff is in the SEC documents.

 

[mysticdrew]

I'm reading the article and the main issue seems to be the secrecy around the Rennes foundation who is a large investor.  I don't quite understand the problem though, you don't control who buys you stock. 

[SFValue]

the trading on this stock is truly incredible, talk about volatility.....look at a 5/3/1 year chart....i am not involved but talk about an inefficient market

 

conf. call should be interesting

 

 

 

[Guest wellmont]

I'm reading the article and the main issue seems to be the secrecy around the Rennes foundation who is a large investor.  I don't quite understand the problem though, you don't control who buys you stock.

 

the article I read, and quoted from in an earlier post, detailed a long list of concerns about ebix and rr. perhaps it's a matter of you finding the right one.

 

I don't get your point. rr controls the rr foundation and ebix. So ebix Does control "who buys their stock" in this case. In fact it was a calculated move to have the foundation buy the stock in "size".

[siddharth18]

http://www.bloomberg.com/news/2013-08-06/ebix-said-to-be-reviewed-by-u-s-for-money-laundering.html

 

This is the same guy publishing the article.

 

"Federal investigators are reviewing Ebix Inc. (EBIX)’s cross-border financial transactions to see whether the Atlanta-based software company engaged in money laundering, according to three people with knowledge of the matter."

 

Hmm...so three people sat down with Greg Farrell to tell him about cross-border financial transactions a few days before quarterly results? Similar to how "four people with direct knowledge of the probe" told Greg Farrell all about it, couple of days before Q3 2012 results?

 

And why should this be more negative than any of what's not already known? If there's an investigation it will consist of an entire colonoscopy. Everything will be checked - accounting irregularities, wire transfers, etc etc.

 

Sorry, if it was intended to shake the tree and convince me into a panic selling, it didn't work. I'm far from panicking.

 

FWIW, I hate attacking the "messenger" but his articles reek of irregularities, bias and suspicious timing.

[LC]

Not sure how one can intelligently take a position in this company. Whether the claims are true or not, too many issues keep popping up. The long position here is that Goldman was wrong. Is that a bet anyone really wants to take, especially on a company with so many issues surrounding it? Investing here is speculation.

[Liberty]

The Rennes Foundation and the Raina Foundation aren't the same thing.

[Guest wellmont]

The Rennes Foundation and the Raina Foundation aren't the same thing.

 

more complexity, more opaqueness, more obfuscation.

[mysticdrew]

The Rennes Foundation and the Raina Foundation aren't the same thing.

 

more complexity, more opaqueness, more obfuscation.

 

I don't see how that relates.  Just because an investor shares a similar sounding name as another foundation affiliated with the CEO doesn't make  it a conspiracy.

[Liberty]

Talk about volatility. The way things are going it could close the day flat. Or even weirder.. in positive territory.  ???

[Guest wellmont]

 

I don't see how that relates.  Just because an investor shares a similar sounding name as another foundation affiliated with the CEO doesn't make  it a conspiracy.

 

we each have a different take. mine is more skeptical than yours. both are valid. the truth will be revealed in time, however.

 

[blainehodder]

I bought a little more.  Wild vol.

[Martian]

from EBIX..

 

http://seekingalpha.com/news-article/7269302-ebix-comments-on-false-and-inaccurate-assertions-in-bloomberg-article

 

"Ebix confirmed that it has no business relationship or transactional relationship with any company affiliated with the Rennes Foundation, other than the investment in Ebix common stock by the Rennes Foundation"

[Guest wellmont]

from EBIX..

 

http://seekingalpha.com/news-article/7269302-ebix-comments-on-false-and-inaccurate-assertions-in-bloomberg-article

 

"Ebix confirmed that it has no business relationship or transactional relationship with any company affiliated with the Rennes Foundation, other than the investment in Ebix common stock by the Rennes Foundation"

 

who is the rennes foundation? where are the details?

[siddharth18]

Talk about volatility. The way things are going it could close the day flat. Or even weirder.. in positive territory.  ???

 

Yeah. There must've been strong buying around the low $8 area because even in late June shares didn't break $8 - and remember, the selling pressure was much stronger then (merger arbs, etc), than now.

 

I bought a little more.  Wild vol.

 

I added some too. Strange how shares only remained in $8 for just 10 minutes. I wouldn't be surprised if Daniel Yu was aggressively covering around $8 since he mentioned in his thesis that "Ebix Worth No More Than $8, Likely Headed To $0"

[Guest wellmont]

The lead director of the Rennes Foundation, which is based in Liechtenstein, is Rolf Herter, a Zurich attorney who is also a member of Ebix’s board of directors. The foundation owns 9.6 percent of Ebix’s stock, according to public records, which don’t identify the foundation’s owners.

 

lichtenstein? lol.

[Guest wellmont]

from EBIX..

 

http://seekingalpha.com/news-article/7269302-ebix-comments-on-false-and-inaccurate-assertions-in-bloomberg-article

 

"Ebix confirmed that it has no business relationship or transactional relationship with any company affiliated with the Rennes Foundation, other than the investment in Ebix common stock by the Rennes Foundation"

 

with any company "affiliated" with rennes...does not deny business relationship with rennes itself.