EBIX - Ebix Inc

[Jurgis]

I sold this for a wash, but unlike multibaggers that I sold on valuation I don't regret the sale. IMO it was far from clear that there was no fraud going on. And longs are celebrating post factum where the story could have easily gone the other way.

 

We can never truly know... but some do better research than others:

 

https://www.scribd.com/presentation/129539959/Understanding-Ebix-IP-asset-Transfer

 

https://www.scribd.com/presentation/129698031/Longlivedassets-note16

 

Because *you* (or I) don't understand something... doesn't allow the excuse of lucky longs to be used in hindsight.

 

FWIW.

 

I'm gonna disagree. Neither you nor any longs or shorts really know what was the probability of the fraud. So, no, it's not that some longs really knew that it's not a fraud. They bet that way and succeeded in this case. And that's it.

[Liberty]

I'm gonna disagree. Neither you nor any longs or shorts really know what was the probability of the fraud. So, no, it's not that some longs really knew that it's not a fraud. They bet that way and succeeded in this case. And that's it.

 

Isn't that what all of investing is, though? Taking positions on things that are of various levels of unknowability?

[Jurgis]

I'm gonna disagree. Neither you nor any longs or shorts really know what was the probability of the fraud. So, no, it's not that some longs really knew that it's not a fraud. They bet that way and succeeded in this case. And that's it.

 

Isn't that what all of investing is, though? Taking positions on things that are of various levels of unknowability?

 

Yes, it is. What I am trying to say that you cannot evaluate even post factum the probability of whether you could have been right vs wrong. Especially in cases of possible fraud. So the Monday morning quarterbacking of "We longs knew all the time it's not fraud" is really based on nothing more than "this time we were right". It could have been 99% chance not-a-fraud, 50% chance not-a-fraud, 1% chance not-a-fraud, the outcome does not tell you which one it was.

 

It's an outcome based bias or whatever it's called. "My analysis is right because the outcome went my way".

[cameronfen]

I'm gonna disagree. Neither you nor any longs or shorts really know what was the probability of the fraud. So, no, it's not that some longs really knew that it's not a fraud. They bet that way and succeeded in this case. And that's it.

 

Isn't that what all of investing is, though? Taking positions on things that are of various levels of unknowability?

 

Yes, it is. What I am trying to say that you cannot evaluate even post factum the probability of whether you could have been right vs wrong. Especially in cases of possible fraud. So the Monday morning quarterbacking of "We longs knew all the time it's not fraud" is really based on nothing more than "this time we were right". It could have been 99% chance not-a-fraud, 50% chance not-a-fraud, 1% chance not-a-fraud, the outcome does not tell you which one it was.

 

It's an outcome based bias or whatever it's called. "My analysis is right because the outcome went my way".

 

That may be true of your analysis, or even the analysis of the people you followed on this board.  But you don't know who actually went to source all their business or talked to all their customers.  Someone could have done that and bought a large stake and realized, quite reasonably, that this was only a 1% chance of a fraud.  I think it may be slightly unfair to critique the work of others if you don't know the work they went through.  I never looked very closely at it, but someone else might have.  I guess the other side of the coin though is if you made lots of money here, you probably really don't know if it was luck or skill (even if you did all the legwork and determined it was a 1% fraud chance).  You maybe have some guesses but...

[Jurgis]

I'm gonna disagree. Neither you nor any longs or shorts really know what was the probability of the fraud. So, no, it's not that some longs really knew that it's not a fraud. They bet that way and succeeded in this case. And that's it.

 

Isn't that what all of investing is, though? Taking positions on things that are of various levels of unknowability?

 

Yes, it is. What I am trying to say that you cannot evaluate even post factum the probability of whether you could have been right vs wrong. Especially in cases of possible fraud. So the Monday morning quarterbacking of "We longs knew all the time it's not fraud" is really based on nothing more than "this time we were right". It could have been 99% chance not-a-fraud, 50% chance not-a-fraud, 1% chance not-a-fraud, the outcome does not tell you which one it was.

 

It's an outcome based bias or whatever it's called. "My analysis is right because the outcome went my way".

 

That may be true of your analysis, or even the analysis of the people you followed on this board.  But you don't know who actually went to source all their business or talked to all their customers.  Someone could have done that and bought a large stake and realized, quite reasonably, that this was only a 1% chance of a fraud.  I think it may be slightly unfair to critique the work of others if you don't know the work they went through.  I never looked very closely at it, but someone else might have.  I guess the other side of the coin though is if you made lots of money here, you probably really don't know if it was luck or skill (even if you did all the legwork and determined it was a 1% fraud chance).  You maybe have some guesses but...

 

Let me clarify: I am not critiquing longs' work. You are totally right. Somebody may have done great work and had rather reliable evaluation of non-fraud probability.

What I am critiquing is people who come to the thread post factum and say more or less "We knew all the time it's not fraud because, see, it's not". Maybe though there are people who did a lot of work and are saying "We knew all the time it's not fraud because of all the work we did in 20XX". And I'm totally happy for those people.

[benhacker]

I'm gonna disagree. Neither you nor any longs or shorts really know what was the probability of the fraud. So, no, it's not that some longs really knew that it's not a fraud. They bet that way and succeeded in this case. And that's it.

 

Isn't that what all of investing is, though? Taking positions on things that are of various levels of unknowability?

 

Yes, it is. What I am trying to say that you cannot evaluate even post factum the probability of whether you could have been right vs wrong. Especially in cases of possible fraud. So the Monday morning quarterbacking of "We longs knew all the time it's not fraud" is really based on nothing more than "this time we were right". It could have been 99% chance not-a-fraud, 50% chance not-a-fraud, 1% chance not-a-fraud, the outcome does not tell you which one it was.

 

It's an outcome based bias or whatever it's called. "My analysis is right because the outcome went my way".

 

That may be true of your analysis, or even the analysis of the people you followed on this board.  But you don't know who actually went to source all their business or talked to all their customers.  Someone could have done that and bought a large stake and realized, quite reasonably, that this was only a 1% chance of a fraud.  I think it may be slightly unfair to critique the work of others if you don't know the work they went through.  I never looked very closely at it, but someone else might have.  I guess the other side of the coin though is if you made lots of money here, you probably really don't know if it was luck or skill (even if you did all the legwork and determined it was a 1% fraud chance).  You maybe have some guesses but...

 

Let me clarify: I am not critiquing longs' work. You are totally right. Somebody may have done great work and had rather reliable evaluation of non-fraud probability.

What I am critiquing is people who come to the thread post factum and say more or less "We knew all the time it's not fraud because, see, it's not". Maybe though there are people who did a lot of work and are saying "We knew all the time it's not fraud because of all the work we did in 20XX". And I'm totally happy for those people.

 

this I agree with, and as you note, of course you can never be truly certain of anything 100%.

 

But there were many bears screaming fraud.  I believe (and believed at the time) that work was clearly done to satisfy that EBIX had the "base rate" case of fraud that was about the average for any multi-national financial firm.  That's not 0%, but it certainly was enough to make many willing to take the plunge.

 

I led off my comments with the fact I didn't own it.  But I didn't own it because I didn't understand the business, not because I thought fraud was likely.  Of course, hindsight vision isn't perfect, I think we all know that... and of course, confidence in facts increases when future becomes history.

[Txvestor]

The real fraud appears to have been at Patriot National, which fortunately Ebix did not acquire in 2016! Seeing how that story played out, makes you realise how sometime it is better to be lucky than good.

[Liberty]

I'm gonna disagree. Neither you nor any longs or shorts really know what was the probability of the fraud. So, no, it's not that some longs really knew that it's not a fraud. They bet that way and succeeded in this case. And that's it.

 

Isn't that what all of investing is, though? Taking positions on things that are of various levels of unknowability?

 

Yes, it is. What I am trying to say that you cannot evaluate even post factum the probability of whether you could have been right vs wrong. Especially in cases of possible fraud. So the Monday morning quarterbacking of "We longs knew all the time it's not fraud" is really based on nothing more than "this time we were right". It could have been 99% chance not-a-fraud, 50% chance not-a-fraud, 1% chance not-a-fraud, the outcome does not tell you which one it was.

 

It's an outcome based bias or whatever it's called. "My analysis is right because the outcome went my way".

 

We're talking about two different things, and that's what's hard with words, they aren't precise enough.

 

If he says he "knew it wasn't a fraud", it means he believed it. Not that he had a crystal ball. Technically, I don't even know that evolution by natural selection is correct, I just assign it a very very high probability.

 

If someone thought with a high enough probably that EBIX wasn't a fraud to put capital on it, then that's a pretty good sign that they really believed it at the time. They "knew" it from the POV of their belief, but they obviously weren't omniscient and "knew" it from some objective point of view (which doesn't exist anyway).

 

It's the same with all investments. You think you know various things about various people, companies, macro, human behavior, etc. But do you know any of it to 100% certainty? No.

 

So when someone takes a bet and turns out to be right, it's still being right even if at the time there was uncertainty or if at some point it could be said that the odds looked against them.

 

When you get to the outcome, the probabilities collapse, right? 5 years ago, EBIX wasn't a shrödinger's fraud, fraud and not fraud at the same time. It always was not a fraud. So he was actually correct to think it wasn't a fraud at the time, even if he was basing the belief on incomplete information.

 

It's also possible that his analysis and information were much better than yours, so looking back things seem like they were very uncertain to you, but looking back to him/her, it seemed a lot less uncertain.

[Liberty]

Let me clarify: I am not critiquing longs' work. You are totally right. Somebody may have done great work and had rather reliable evaluation of non-fraud probability.

What I am critiquing is people who come to the thread post factum and say more or less "We knew all the time it's not fraud because, see, it's not". Maybe though there are people who did a lot of work and are saying "We knew all the time it's not fraud because of all the work we did in 20XX". And I'm totally happy for those people.

 

Most of this thread is me defending the company at the time, not after the fact, so I "knew" to a high enough degree that it wasn't a fraud at the time to satisfy myself (at the time, I've changed since, so might have different views on various things now). I still didn't really profit from it because I bailed, though. Being right is just part of the game, the patience and conviction to let things play out also matters...

[Txvestor]

Wouldn't the energies spent on deconstructing past accusations of fraud, and the differing opinions on that not be better spent on what people feel about its prospects today?

Seems to me that with a mere 2B odd market cap, as well as growth attributed mentioned previously there is potential for significant growth ahead as well.

[Liberty]

Wouldn't the energies spend on deconsteucting past accusations of fraud, and the differing opinions on that not be better spent on what people feel about its prospects today?

Seems to me that with a mere 2B odd market cap, as well as growth attributed mentioned previously there is potential for significant growth ahead as well.

 

I'm not really interested in it today, but others are free to do so. What are your views on the company's prospects today?

[siddharth18]

I sold this for a wash, but unlike multibaggers that I sold on valuation I don't regret the sale. IMO it was far from clear that there was no fraud going on. And longs are celebrating post factum where the story could have easily gone the other way.

 

This is a really confusing post. Your second sentence sounds like you're only speaking for yourself. But then your third sentence makes it seem like you're speaking for all the longs. The entire post gives a vibe of longs just getting lucky, rather than being right, for the right reasons.

 

So why do you feel it was "far from clear that there was no fraud going on" ?

 

The last sentence you wrote can literally apply to any stock during any time period. Consider this: Maybe the longs invested because it was much clearer to them, than it was to you, where the story was going to go?

[estoybien]

Anyone following Ebix lately? A previous message thread died out many months ago, prior to new developments, in particular renewed short attacks, the YTRA acquisition bid, etc. Ebix was previously attacked in the 2011-2014 timeframe but the accusations ended up not having much basis to them. The company finally emerged from the attacks with a new London Market PPL contract win and rev/EPS gains. Over a couple years, stock went from teens to 80s. New short attack started in Sep(?) 2018, still ostensibly based in part on shorts' belief that CEO is a huckster and company is built on fraudulent numbers, but also on no-organic-growth-rollup-destinted-to-fail argument. Stock trading around 50 now. More importantly, tho, short thesis aside, debt-financed dive into Indian finance/other markets is a high-risk, high-reward, bet-the-company strategy. Lots of relevant details left out, I know, but curious to know if anyone has been watching this closely and has well-formed thoughts. I've been in it at varying levels since mid-2000s.

[gfp]

Why start a new thread?

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/ebix-ebix/850/

[cameronfen]

I'm long Yatra, and perhaps you are alluding to this in your post but the Yatra acquisition bid is wild.  See for example here:

 

I have no real opinion on Ebix other than this is kind of sketchy and probably will sell EBIX stock if Yatra is bought out with shares. 

[estoybien]

Why start a new thread?

 

I started to reply on that thread but the website said something like, this thread hasn’t been active for a long time, consider starting a new thread. So I did.

[Jurgis]

Why start a new thread?

 

I started to reply on that thread but the website said something like, this thread hasn’t been active for a long time, consider starting a new thread. So I did.

 

That website comment should be ignored.

 

Hopefully Sanjeev will merge the threads.

[estoybien]

I'm long Yatra, and perhaps you are alluding to this in your post but the Yatra acquisition bid is wild.  See for example here:

 

I have no real opinion on Ebix other than this is kind of sketchy and probably will sell EBIX stock if Yatra is bought out with shares.

 

You were long prior to the Ebix bid? That's a nice premium to reap :)

 

[cameronfen]

I'm long Yatra, and perhaps you are alluding to this in your post but the Yatra acquisition bid is wild.  See for example here:

 

I have no real opinion on Ebix other than this is kind of sketchy and probably will sell EBIX stock if Yatra is bought out with shares.

 

You were long prior to the Ebix bid? That's a nice premium to reap :)

 

yes sold a bit when it went up to 520 but not enough...

[estoybien]

Any thoughts on Ebix's earnings release and conference call today?

[estoybien]

Anyone on this thread gotten back into following Ebix? A lot has happened since last post here. Wondering if anyone has thoughtful comments, esp in light of earnings release and conference call today.

[estoybien]

Ebix ER can't come soon enough. Need some data to know what to make of short thesis.

[estoybien]

Ebix is really crapping the bed.

 

Weizman acquisition a real dog. More generally, revenues from acquisitions not keeping pace with CEO expectations/aspirations.

EbixCash killing margins to chase eyeballs/customers with marketing spend, the need for which was denied previously and now likely will continue (if not accelerate) indefinitely.

$25mil advance looks suspiciously timed to pad Q3 numbers, cost unknown.

Debt servicing and covenants seem troubling, but again not enough transparency.

 

Some positives, including continued growth and imminent launch of BSE joint venture, but future still very uncertain. Too many speculative promises re synergies/cross-selling in India and renewed growth in legacy business. Especially given CEO's spotty record delivering on promises in a timely manner. EbixCash IPO is a pipe dream if its overall strategy doesn't work as hyped. CEO bet the company...

 

 

 

[Liberty]

I haven't thought about this company much in many years, but it's trading at where it was a decade ago.. things certainly don't seem to be going well. DOn't know what's going on, but quick scan of the financials shows quite a big FCF reversal lately, with margins melting a bit.

[griezeman23]

Bet big on India via EbixCash. Was guiding to revenues growing 20% to 30% annually. Tried to claim Q4 (with Diwali in October) is seasonally weak for their India biz which is heavily dependent on remittances and travel (https://tradingeconomics.com/india/remittances and https://finance.yahoo.com/quote/MMYT/financials?p=MMYT) - no mention of seasonality in the business before. There is always an excuse for why the India business is not explicitly growing 20% to 25% on the topline. Software development costs (in investing cash) also jumped significantly meaning true OCF is down more. FCF declining despite the $750mn invested (via debt) in India over last three years.

 

If they are able to IPO the EbixCash business, then they can potentially get out of this mess. I would say the debt load will hurt but rates getting cut 50bps helps a fair amount, as well as a weaker dollar could help them.