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  • Pre-Paid Legal Service, Inc. (PPD) or a Ponzi scheme? 2 comments
    Oct 8, 2009 6:56 AM | about stocks: PPD
    Pre-Paid Legal Services Inc (NYSE:PPD) received a subpoena from the Division of Enforcement of the U.S. Securities and Exchange Commission (SEC) as part of a fact-finding inquiry, sending its shares down as much as 21.0% on October 6th, 2009. Reggie Middleton had publicly proclaimed the downfall of the company six months ago, not hesitating to call it a Ponzi scheme (

    PPD’s market value has continuously depreciated despite healthy financial results over the previous years. Adding back the total buybacks and dividend payments – which the company’s management carried out over the past 10 years – to the current market capitalization will show a decline in the market value of almost 8.9%. This decline would be worse if considered on a real, inflation adjusted basis.

    A large portion of PPD’s shares were held by the board of directors and the management of the company which apparently gave incentives to the management to continue to buy back shares at higher rates. This should raise eyebrows: PPD used revenues collected from membership fees for the purpose of share buyback, instead of pooling back the funds in growth of the stagnating membership base and sales. Between 2004 and 2008, PPD has utilized $238.0 million for shares repurchase at an average price of $38.1, of which a staggering 28.9% (that’s almost 1/3rd) has gone to the insiders. In fact, the management has been the net seller in the insider trading activity, with net sales between July 2003 and September 2009, amounting to $69.5 million.

    Again, the aggressive shares repurchase over the years has helped the management to artificially escalate the company’s EPS. For more discussions please follow the link:
    Stocks: PPD
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  • PDT
    , contributor
    Comments (337) | Send Message
    I think the gig is finally up for PPD. Investigations by TWO divisions of the SEC (Enforcement and Corp. Finance), plus the FTC, plus all the suits by former associates, members, attorney generals... I don't see a plausible way they can survive this.
    Without a doubt, the SEC ordered them to cease their share buybacks while the investigation is ongoing, and SEC inquiries never end. They just linger like a black cloud. On a thinly traded stock, the management was able to prop up the share price with the share buybacks, but with that tool taken away, they are in trouble.
    I firmly believe this one is a zero within 12 months - probably sooner.
    9 Oct 2009, 11:16 AM Reply Like
  • larrylpl
    , contributor
    Comment (1) | Send Message
    PPD has used half-truths and deception to lure nearly 1.5 MILLION people into paying it to become an "associate" and usually buying a membership so that they could "vested" for earning commissions on the memberships that they sell and to recruit more people into the "opportunity" (close to 1/3 of all active legal memberships are owned by "associates"). Almost all of the growth in memberships for the past few years is from the increase in associate purchased memberships.


    In order to keep its stock price from severely dropping, PPD has aggressively bought back 60% of its outstanding stock since 1999. While this has increased the per share price (most of the benefit going to 6 people who either own and/or control nearly 80% of the outstanding stock), the company's market cap is worth less today than it was before it began the stock repurchases.


    PPD's real growth has stagnated, but like the hype it uses to suck huge numbers of people into joining its "opportunity", it has used nearly a half-billion dollars to buy back shares to increase the stock price, even as its membership growth has essentially stopped.
    10 Mar 2010, 05:48 PM Reply Like
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