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Anony123

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  • Ebix Worth No More Than $8, Likely Headed To $0 [View article]
    There were just some disgruntled past employees that Robin fired who went to Justice with false accusations of fraud that went on when they worked there. They have an axe to grind against EBIX. Justice was not going to just leave things alone given the class action lawsuit currently going on. So they stepped in to stop the deal so they can investigate these past employee claims. Once they find out these people are just mad and have an axe to grind and are telling lies, it is over.
    Jun 22 10:46 AM | 1 Like Like |Link to Comment
  • Ebix Worth No More Than $8, Likely Headed To $0 [View article]
    Sure. Initially. And they did make an initial motion to dismiss that was denied in Sept 2012. So the case moved forward into the discovery phase. And since then EBIX has made its case and felt they were in a good enough position to file for dismissal again. Which is what they did 2 days ago.

    The prosecutors just didn't have enough information to back up their claims on the international tax strategy for instance. Just as Gotham didn't have enough information to back up their claims on the $65 million. The truth was it was an intercompany loan that shook out in the consolidation. Gotham didn't know that because they don't have the reconciliation statements. And in the same way, EBIX was able to present its case on the international tax strategy, provide the transfer pricing reports from E&Y International, etc. And so now they are trying to get it dismissed as the prosecution's claims have been wildly off base.
    Jun 21 11:41 PM | 1 Like Like |Link to Comment
  • Ebix Worth No More Than $8, Likely Headed To $0 [View article]
    If the class action lawsuit gets dismissed, it will really take off. They filed to have it dismissed 2 days ago because things have gone so well for EBIX in the discovery phase.
    Jun 21 10:06 PM | 2 Likes Like |Link to Comment
  • Ebix Worth No More Than $8, Likely Headed To $0 [View article]
    Why Gotham's analysis has been wrong:

    1. They looked at the financials of various subsidiaries. Of course anyone who has ever done this realizes that it is a worthless endeavor unless one has the consolidating financials. Those aren't public. So Gotham didn't realize they were making error after error. They have a mountain of additional work on the subject that will never see the light of day because they realize they screwed it all up because they don't have the consolidating financials.

    2. They don't understand how the tax strategy works. That they only have to pay the low tax rates if the cash stays in the foreign subs. And it does stay there because they keep acquiring companies that are also domiciled in those foreign countries. That is how it all works and why it is all legal. Think about a Cayman islands account. You don't have to pay taxes on the money down there. But if you ever transfer it in, you would have to pay taxes as if it were earned here. EBIX just keeps it down there. And then they use it to buy companies that are also domiciled there. So they never have to pay the U.S. federal tax rate. It is fairly simple. Most software companies do this in some form or fashion.

    3. Regarding the charity stuff, of course the IRS filings don't tie because they don't have the reconciliation table showing unrealized gains/losses. When that showed up in the filing form in 2011, then everything ties going forward. Quite simple. What assets did Robin's charity hold? Well EBIX stock of course. Like 215k shares. The irony is it was the short reports that pushed the stock down, which led to unrealized losses, which led the charity IRS filings not to tie. Since Gotham realizes all this, they knew better than to take Robin up on his $50k offer to go through the books. They know they are wrong, or else they would go take the money. That's the tell. That is how you know they are lying.

    I could go on and on. Gotham has committed error after error. And now what are they left with? A couple of past employees that are disgruntled because Robin fired them and so they are telling lies about the company.

    EBIX will get those accounting firms to issue an opinion on the international tax strategy. The class action lawsuit is going so well for them that they filed to dismiss it all two days ago.

    When these clouds go away, this is not a $15 stock. It is not a $20 stock. It's $25+.
    Jun 21 07:00 PM | 5 Likes Like |Link to Comment
  • Why EBIX Is A Double In The Next 3-6 Months [View instapost]
    It is sounding like the company may hire the big 4 accounting firm and the forensic/fraud accounting specialist Goldman used to provide them with an opinion on their international tax strategy. That's what I think.

    It is also sounding like the main class action lawsuit down in Georgia, which is in the discovery phase, has gone so well for EBIX that they filed to dismiss it two days ago. Does anyone have access to PACER to see that?

    All Gotham has at this stage are a couple of disgruntled employees who Robin fired because they were incompetent and they are spreading lies about the company. They took them to Justice and that is why they initiated the probe. That is where Gotham is getting the quotes he is putting out on Twitter. That Robin doesn't like Americans, etc. Of course what Robin does is buys a company, then fires the execs (aren't needed), HR and other corporate employees (not needed) and all the highly paid incompetent developers that might be in the U.S. Then he replaces them with smarter, harder working developers in India or Singapore who will work twice as hard for half as much. Leaves quite a few disgruntled employees in the wake. And so they say oh Robin just doesn't like Americans. That's all Gotham has left at this point. The word of a few disgruntled employees. Comical. Won't take Justice long to look into the false allegations of these disgruntled past employees to see they are lying about this and that. ...
    Jun 21 06:44 PM | 1 Like Like |Link to Comment
  • Ebix Worth No More Than $8, Likely Headed To $0 [View article]
    It is sounding like the company may hire the big 4 accounting firm and the forensic/fraud accounting specialist Goldman used to provide them with an opinion on their international tax strategy. That's what I think.

    It is also sounding like the main class action lawsuit down in Georgia, which is in the discovery phase, has gone so well for EBIX that they filed to dismiss it two days ago. Does anyone have access to PACER to see that?

    All Gotham has at this stage are a couple of disgruntled employees who Robin fired because they were incompetent and they are spreading lies about the company. They took them to Justice and that is why they initiated the probe. That is where Gotham is getting the quotes he is putting out on Twitter. That Robin doesn't like Americans, etc. Of course what Robin does is buys a company, then fires the execs (aren't needed), HR and other corporate employees (not needed) and all the highly paid incompetent developers that might be in the U.S. Then he replaces them with smarter, harder working developers in India or Singapore who will work twice as hard for half as much. Leaves quite a few disgruntled employees in the wake. And so they say oh Robin just doesn't like Americans. That's all Gotham has left at this point. The word of a few disgruntled employees. Comical. Won't take Justice long to look into the false allegations of these disgruntled past employees to see they are lying about this and that.
    Jun 21 06:40 PM | 1 Like Like |Link to Comment
  • Ebix Worth No More Than $8, Likely Headed To $0 [View article]
    Let's keep in mind that Goldman spent millions of dollars on a big 4 accounting firm and also on a forensic/fraud accounting specialist to go through the books with a fine tooth comb. The result was a clean bill of health. Not only did Goldman do their due diligence, but so did Credit Suisse as they were one of the debt providers. Morgan Stanley advised on the deal and provided the fairness opinion, so they presumably did some due diligence as well. Although likely not as in depth as Goldman and Credit Suisse. The international tax strategy is sound. And that is the only major financial risk to the company. They have transfer pricing reports done by E&Y International. And as long as the money stays overseas, they don't have to pay the U.S. federal income tax rate. And of course the money does stay overseas because they use it to make acquisitions. Since every other software company does the same thing (house the IP in Singapore, India, Australia), they use the overseas money to make overseas acquisitions. Pretty simple. Just a few things to keep in mind.
    Jun 21 05:58 PM | 2 Likes Like |Link to Comment
  • Why EBIX Is A Double In The Next 3-6 Months [View instapost]
    Let's keep in mind that Goldman spent millions of dollars on a big 4 accounting firm and also on a forensic/fraud accounting specialist to go through the books with a fine tooth comb. The result was a clean bill of health. Not only did Goldman do their due diligence, but so did Credit Suisse as they were one of the debt providers. Morgan Stanley advised on the deal and provided the fairness opinion, so they presumably did some due diligence as well. Although likely not as in depth as Goldman and Credit Suisse. The international tax strategy is sound. And that is the only major financial risk to the company. They have transfer pricing reports done by E&Y International. And as long as the money stays overseas, they don't have to pay the U.S. federal income tax rate. And of course the money does stay overseas because they use it to make acquisitions. Since every other software company does the same thing (house the IP in Singapore, India, Australia), they use the overseas money to make overseas acquisitions. Pretty simple.
    Jun 21 04:28 PM | 2 Likes Like |Link to Comment
  • Ebix: Growth, Value And Serious Allegations [View article]
    There was no formal investigation. The Copperfield Research attack in 2011 caused the SEC to look into some things and they ended up having a correspondence with EBIX. The SEC has correspondences with many companies. If that leads to something, then they may open up a formal investigation. In the case of EBIX, they just made them add more clarifying language regarding organic growth and then ended the correspondence by saying their review was done.

    http://1.usa.gov/VOEVdi
    Mar 30 05:03 PM | 1 Like Like |Link to Comment
  • Ebix: Growth, Value And Serious Allegations [View article]
    The SEC had a correspondence with the company. They made EBIX add more clarifying language regarding organic growth. Then they completed their review on January 16, 2013, as can be seen by the filing on the same date. And the increased scrutiny led to a number of restatements. Every filing has some human error in it. In EBIX's case, they got called on it and had to restate. Unfortunate, but not a big deal. Regarding the Gotham City attack, their report has been shown to be wrong. Read through the comments by Spin on the first Seeking Alpha article Gotham submitted. Spin links to two presentations he put together refuting Gotham's report issue by issue. The company also had an hour long conference call refuting the report issue by issue. The attack is pretty sad and way off mark. Gotham will likely issue another piece soon because the put option activity has jumped in the last week. That is how they operate. Should create a great buying opportunity. There is value in this stock, and the patient investor will be rewarded.
    Mar 27 11:51 AM | 3 Likes Like |Link to Comment
  • Federated National Holdings Company - Buying Into A Fixed Income Portfolio At A Significant Discount [View article]
    "Enterprise value" and "insurance company" do not belong in the same sentence when talking about valuing an insurer. TEV is a completely irrelevant thing to look at for any purpose with an insurance company. And a large portion of that investment portfolio has a claim on it (reserves obviously). Those reserves need to include the unearned premium reserve in addition to unpaid loss & LAE reserve. When the UPR becomes earned, a large portion of it will flow into unpaid loss & LAE. And one thing to keep in mind is that since insurance companies mainly invest in bonds, they are struggling to find yield. Their portfolio continually gets rolled over into lower yielding assets. A slow bleed which will go on for a long time. I would want to look at what they are invested in too. Need to get the statutory financials and look at Schedule D I believe. Looks like unrealized gains made up about 60% of growth in book value in 2012 so far by the way and is worth looking into.

    The loss ratio entails both paid losses on the year (for all prior accident years) plus incurred losses for new business. Incurred losses = expected losses. It's a made up number. A best guess. So if the loss ratio is much lower than in the past (which it appears to be), this can be dangerous because they might not be booking enough reserves because of overly optimistic expectations (or to boost earnings in the short run of course; very easy to manipulate earnings for insurance companies in this way). What is their history of reserve development? Definitely need to look at that to see how much manipulation and/or bad underwriting has happened in the past. And high growth for an insurance company can also be dangerous. It is simple to grow an insurance company. Don't assess the risk properly and underprice the market. That's great today, but leads to blowups down the road. Look at the history of their combined ratio broken out between the loss & LAE ratio and the expense ratio (5-10 yrs; may need to dig up statutory financials for this). Break out reserve development and CAT from the loss & LAE ratio. Is the expense ratio fairly consistent? How has reserve development been? How about the loss ratio excl. CAT? If it is ticking down from historical levels and growth is jumping up, watch out.

    Are they a takeout? Anyone can take premium out of Citizens if they have the capital to support it. These guys are probably just taking business out. You can choose whatever business you want, but need experienced mgmt who have a good risk model and a solid track record of using it effectively. After reading bios of the mgmt team, they look atrocious.

    Looks like their reinsurance costs are dropping drastically. Another sign they are juicing up earnings. Really need to dig into the reinsurance contracts and how they have changed to get a sense of how much more risk they are now taking on relative to the past. Admittedly, this is pretty complicated.

    Regarding valuation, book value is the relevant thing to look at. You need to do a price/bv vs. forward ROE regression analysis of peers (other short-tailed insurers) to get a sense on whether it is over or undervalued. It looks like it is trading at 0.9x book with a forward ROE of maybe 8%, so looks appropriately valued to me from an intrinsic standpoint, but I’d need to see the graph. Of course intrinsic could grow, although the way they are doing it looks risky. Just erase from your memory the fact that they traded at 3x book value in the past. That was absurd and totally unjustified. I am sure there was some reason, but I don’t feel like looking. The best specialty commercial guys rarely trade above 2x bv. During hard markets they will get up there and even go towards 2.5x. PRA, one of the best specialty commercial insurers out there, only trades at 1.3x book today. Of course they have a lot of excess capital and the appropriate thing to do would be to back it out of your p/bv vs. ROE analysis, then add it back in dollar for dollar. PRA is probably trading closer to 1.6x-1.8x excl. excess cash.

    Anyways, just wanted to throw out a few thoughts. I am not saying things won't be alright, just saying this is a high risk investment.
    Mar 21 04:17 AM | Likes Like |Link to Comment
  • Ebix: All Distraction, No Clarity [View article]
    1.) Generally, for companies to receive favorable tax treatment with foreign entities, they have to follow a strict set of rules. For instance, where the Board members reside, how many meetings they have in the U.S., how many days they spend in the U.S., etc. I presume EBIX's board makeup is due to these various constraints.

    2.) The CEO, who is the heart and sole of the company, owns nearly 10%. It doesn't get much better than that in terms of skin in the game. Regarding executive pay, Robin runs a tight ship focused on incentive pay. If you want to make a lot, you have to earn it. Thus, the salaries are low and the bonus potential high. The head of EBIX Australia made $709k in 2011. An SVP made $512k. The CFO made less, presumably because of some of the amended filings they had to make. If these guys perform, the pay is there. If not, then they shouldn't expect much. Doesn't get much better than that from a shareholder perspective.

    3.) They give 5 years of annual and quarterly financial SEC filings. I wouldn't sweat it just because the proxies and 8-Ks aren't there. Go to the SEC website to get them.

    This company has seen EPS compound at an annual rate of more than 60% over the last 10 years, and at more than 40% over the last five years. The growth is driven by acquisitions. They are disciplined at how much they pay. Then they cut costs, realize synergies and outsource product development to India, Singapore, etc. It results in a jump in EPS and a pro forma purchase multiple that is the best in the business. EBIX has probably the best executed acquisition strategy of any public company in the world as seen by their EPS growth.
    Mar 11 06:30 AM | Likes Like |Link to Comment
  • Ebix: All Distraction, No Clarity [View article]
    Great analysis Spin. On pg. 24 of your work, are you sure a cash payment of $78m was made from Ebix Singapore Pte Ltd to EbixExchange Australia Pty Ltd? I think this was just the transfer of Telstra and Heart to Singapore. So both the assets and the loan were transferred. Maybe there was a small amount of cash that switched hands. But it appears the bulk of this was just an intercompany transfer. And those changes on the cash flow statement are just how intercompany transfers are accounted for. Pg. 36 provides language that may support this theory.
    Mar 11 05:21 AM | 3 Likes Like |Link to Comment
  • Ebix: All Distraction, No Clarity [View article]
    You should read Spin's comments. He sheds light on the issue and shows where Gotham got things wrong. http://bit.ly/YIwYUi
    Mar 11 05:12 AM | 1 Like Like |Link to Comment
  • Ebix: All Distraction, No Clarity [View article]
    Gotham City clearly does not understand how the accounting works for transferring intercompany loans. On pg. 10 of their new report, they say "Then the 'Proceeds from loan from a related company' within the 'Cash flows from financing activity' clearly shows an in-flow of cash." They think this is evidence that Singapore should have received $81.6m of cash. This is wrong. As you can see on pg. 8 of their first report, the Singapore sub clearly shows a loan payable of $81.6m on its balance sheet. So the loan was transferred to Singapore and show up as a non-current liability. Gotham City doesn't appear to be very good at accounting.
    Mar 7 03:50 PM | 10 Likes Like |Link to Comment
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