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  • Ebix: All Distraction, No Clarity [View article]
    In my view it is premature to declare that GCR was "right." Congratulations for a good trade might be in order, but the fundamental merits of his accusations are far from validated.

    The EBIX story over the years has been a series of "I told you so" moments from both the longs and shorts as the stock cycled between hit piece and recovery. Until Raina is handed a criminal indictment, or a significant restatement and D&O-bar from the SEC, or until the stock trades in the single digits for an extended period of time (several quarters or more), this story will be far from over.

    Investors have all run to the other side of the boat on the Goldman termination, but the boat has not capsized yet. At $11, with GCR now claiming it is worth $0 (based on mysterious, new, fearmongering unreleased documents -- ohh, scary!), this is still a battleground stock if I have ever seen one.
    Jun 21 09:11 AM | 3 Likes Like |Link to Comment
  • Ebix: All Distraction, No Clarity [View article]
    Spin, excellent work on both presentations!

    The key takeaway on the Long-Lived Assets issue seems to be that because Ebix Singapore owns several other Ebix subsidiaries (e.g. Brazil), if you segregate the IP by geographic operational use vs physical geographic ownership, this results in two different numbers between the 2010 an 2011 presentation formats, just like Raina said.
    Mar 11 09:04 AM | 1 Like Like |Link to Comment
  • Ebix: All Distraction, No Clarity [View article]
    No, Gotham, you are actually incorrect and continue to mislead with erroneous factual references.

    I have the Australian filings.

    Yes, the financial notes you directed us to disclose that the Australian parent company owned 100% of the other two entities from at least 2009 forward, but that is irrelevant and not the original commenter's point.

    The original commenter was referring to accounting consolidation, not legal ownership. And for that we go to Note 1, Summary of Accounting Policies. The 2011 filing clearly states that it for "Ebix Australia (VIC) Pty Ltd and its controlled entities" whereas the earlier filings simply list the parent company only as the subject of the audit.

    As such, the point still stands that without the filings for the other Australian companies you are merely speculating about 2008 and 2009 based on a limited amount of information.
    Mar 8 03:23 PM | 9 Likes Like |Link to Comment
  • Ebix: All Distraction, No Clarity [View article]
    Here is a blog entry from January 2013 written by Gotham City Research under his real psuedonym (LongShortTrader) where he discloses his thoughts on the merits of going public with short-selling ideas:

    These thoughts include arguably illegal market manipulation. Gotham writes that such a short seller (i.e., himself):

    "...believes in his ability to alter the outcome because he thinks he can:

    (a) frighten weak longs to sell at year end
    (b) destroy confidence with a resulting lower stock price
    (b) [sic] limit flexibility of use of equity as currency, i.e. higher effective cost of capital; encourage uneconomic/non growth uses of cash such as buybacks
    (c) pressure regulatory bodies to act
    (d) draw attention to the most unsavory side of his target, leading the public and press to believe the target is defined by its worst members
    (e) cause customers and employees to worry, and leave."

    This public disclosure by LongShortTrader -- coupled with the large volume of put options purchased on EBIX and the hit pieces on EBIX containing deceptive and inaccurate information -- should be investigated by the SEC.
    Mar 7 10:46 AM | 12 Likes Like |Link to Comment
  • Ebix: All Distraction, No Clarity [View article]
    As reported by SNL Financial on Feb 26, Gotham City Research was identified as Daniel Yu who posts on Twitter under the handle @LongShortTrader.

    Here is a link to the SNL author announcing this information on twitter. His tweet contains a link to the (pay-walled) article at SNL:
    Mar 7 10:32 AM | 6 Likes Like |Link to Comment
  • Ebix: All Distraction, No Clarity [View article]
    It's always amusing when a 30-year-old non-CPA with no accounting experience tries to tackle complex international accounting and taxation issues under a fake-firm pseudonym with liberal usage of the royal "we" to artificially bolster his non-existent credentials.
    Mar 7 10:05 AM | 20 Likes Like |Link to Comment
  • The Truth About Robin Raina's Ebix: Part I [View article]
    Bigchimp, that's amusing if you think that the current situation with Chinese audit affiliates is representative of "foreign arms of big US accounting firms." I think most would agree that China is a unique issue given lack of required PCAOB oversight, a proven history of fraud, and the general political landscape between U.S. and China.

    Oh, any by the way, evidence suggests that you are wrong about Ernst & Young. It is most likely their U.S. branch that conducted or oversaw the consulting engagement. See here:

    "Controls: The Company also announced that it has engaged the services of Ernst & Young to augment the Company’s management and execution of our worldwide SOX compliance work regarding internal controls. The engagement deliverables include redesign of testing plans, testing of all controls related to Finance, HR, IT, Transfer Pricing, Income taxes and other operations; identification, analysis and reporting of any control deficiencies; remediation and retesting of controls if any deficiencies are identified. The engagement involves assisting in compliance with Section 404 of the Sarbanes-Oxley Act of 2002, across United States, Singapore, Australia and India. The Company believes that this endeavor will further strengthen Ebix’s control structure and internal processes over financial reporting and disclosures."

    I highly doubt that EBIX engaged a bunch of foreign accountants to polish up their U.S. SOX compliance. It is reasonable to assume the same with regards to U.S./ IRS tax compliance.
    Feb 27 10:27 AM | 4 Likes Like |Link to Comment
  • The Truth About Robin Raina's Ebix: Part I [View article]

    I took your advice and further researched EBIX's potential IRS liability which you claim to be at least $100 million (without providing any transparent calculations that support your claim).

    It turns out that in a July 2011 interview ( Robin Raina is on the record expressly stating, "our US NOLs in all those periods serve to largely offset the cash impact of any adverse [IRS] ruling."

    In the same interview Raina also notes that Ebix's entire transfer pricing system was setup and is regularly reviewed by Ernst & Young (not CB&Y as your report implies).

    I look forward to your timely response... (if you haven't sold your put options yet and rode off into the sunset.)
    Feb 23 03:57 PM | 5 Likes Like |Link to Comment
  • The Truth About Robin Raina's Ebix: Part I [View article]
    While somewhat minor, here is another inaccuracy of the Gotham report. I welcome Gotham to respond.

    Gotham claims (p.37) that Ebix is an unattractive acquisition target because "Raina is guaranteed a cash payment of 20% of the difference between the transaction price and the valuation of the company at $7.95 per share in the event of a change in control."

    In actuality, Raina's guarantee is calculated based on the difference between his stake of ~9.5% and 20.0%, so it's really a 10.5% kicker on the difference between $7.95 and the deal value. (See the definition of "Share Base" in the Ebix 10/9/12 proxy form DEF 14A, p. 27).

    While that's a nice pay for Raina, it's not out of line with out key-man golden parachutes and it's not as daunting for a buyer as asserted by Gotham.

    Oddly enough, Copperfield also got this fact wrong in their report a few months ago. I'd encourage Gotham in the future to independently verify its own citations.
    Feb 22 09:07 AM | 3 Likes Like |Link to Comment
  • The Truth About Robin Raina's Ebix: Part I [View article]
    Gotham, thanks for the response.

    I still take issue with your calculation of $100 million IRS liability, because it is one of the more prominent quantitative conclusions of your report and your calculations lack necessary transparency.

    You went out of your way to spend considerable effort preparing a detailed tax calculation table normalizing taxes at a 34-35% rate by year, but why would you not, at the least, include NOL's and interest on this table, if these were also considered and analyzed by you? Your 'black box' approach to determining $100 million seems vague and arbitrary at best.

    Most importantly, you did not address at all why you feel a 34-35% normalized tax rate is appropriate for a multinational company? This seems like the lynch-pin of your analysis but fails basic common sense and flies in the face of comparable tax rates for other multinationals.
    Feb 22 08:44 AM | 9 Likes Like |Link to Comment
  • The Truth About Robin Raina's Ebix: Part I [View article]
    Just one small rebuttal point to this report at first glance. I welcome Gotham to respond.

    The report makes numerous assertions as to the potential U.S. tax liability if the IRS investigates the foreign earnings. For example, on p. 36 of the report, "We estimate the IRS liability alone can easily exceed $100 million."

    It seems to me that Gotham has ignored the significant $53.5 million of U.S. Net Operating Losses (NOLs) available to EBIX as of 9/30/12. Moreover, an assumption of a normalized 35% tax rate assumes that all income is U.S. in nature, which is clearly false.

    This type of over-stated analysis exemplifies the author's short-selling bias and therefore challenges the credibility of the author's other assumptions which are less easily vetted.
    Feb 21 12:00 PM | 9 Likes Like |Link to Comment
  • OCZ: Doom And Gloom Or Buyout Candidate? [View article]
    The problem here is that you are misunderstanding the OCZ 8-K because, admittedly, it is written in SEC legalese.

    The disclosure, "OCZ agreed to deliver pledge agreements and appropriate financing statements pledging to the Agent 65% of the voting equity interest of Indilinx Co. ..." refers to standard collateral pledge agreements, not a transfer of ownership. You should Google "lender pledge agreement" and you will see it is a standard practice in commercial banking.

    Moreover, you should take a look at paragraph 3.6, Post-Closing Covenants, of the original May 10, 2012 Credit Agreement between OCZ and WFC (

    It appears that, off the bat, OCZ had already agreed to pledge 65% of its interest in all subsidiaries as collateral within 180 days of closing. I suspect that because they were already in violation of financial covenants before this period expired, they probably never complied. WFC is probably just enforcing the original terms of the agreement.

    Do you agree now that your interpretation of this issue was inaccurate?
    Feb 1 12:22 PM | 6 Likes Like |Link to Comment
  • OCZ: Doom And Gloom Or Buyout Candidate? [View article]
    OCZ is not "giving away parts of the company" to Wells Fargo as you incorrectly assert in your article. Rather, it appears the Indilinx pledge is just a form of additional security provided to Wells Fargo in an event of default. I would speculate that this has to do with the challenges and complexities of recovering/selling assets from a foreign subsidiary in a downside scenario. By forcing OCZ to transfer assets from Korea to the U.S. parent, and by receiving the equity pledge in the interim period, Wells Fargo mitigates this risk.
    Feb 1 09:08 AM | 10 Likes Like |Link to Comment
  • OCZ's Future Looks Brighter Than Ever [View article]
    Locke, your harsh criticism is rather sensationalist. The fact is that the BSOD and other bugs were largely due to problems outside of OCZ's control related to SandForce and motherboard SATA interfaces, and they were also less frequent than a smear campaign by competitors and short-sellers on newegg would have you believe. The absolute number of complaints may have increased significantly (and therefore created a louder 'voice' on review sites), but relative to OCZ increasing SSD sales by 400-500% year over year and selling now hundreds of thousands of drives per month, the incidence rate of errors was within industry standards.

    Moreover, it appears that recent firmware updates have cured most if not all of these serious legacy bugs.

    All that being said, point well taken--OCZ should not have been in the position to so heavily rely on partners like SandForce for success, which is why the recent launch of the OCZ Octane drives powered by their own Everest Indilinx controllers is so exciting.

    Lastly, rebates and drive discounts are a function of falling NAND flash prices, and OCZ margins are actually increasing. Do some real research next time before you tout over-reaching flawed conclusions.
    Oct 25 11:07 AM | 4 Likes Like |Link to Comment
  • OCZ - The Master of SSD (Shady, Suspect, Deceitful) [View instapost]
    Disclosure: I am long OCZ and I work professionally in forensic accounting.

    As an investor in OCZ, when I read the Copperfield Report, beyond the obvious hyperbole and misleading insinuations, the only points made that concerned me were with respect to the reconciliation of segment revenue. After studying this issue more carefully tonight, I have concluded that Copperfield's allegations on this point are also incorrect and unfounded, if not outright fraudulent. Here's why:

    The first discrepancy noted by Copperfield is whether the Q32010 SSD revenue is $21.2mm or $9.8mm. It appears that Copperfield is correct that the 8-K release is different from the original 10-Q numbers and it appears Memory and SSD have been flip-flopped. Copperfield goes on to incorrectly assume that the 10-Q numbers must be right, and then concludes that the 8-K and PR using the higher growth rate was deceptive, etc. etc.

    In a blur of accusations, I almost missed where Copperfield notes, "Our first reaction when seeing this irregularity was that it must be a flip-flop mistake. However, we were unable to find any reclassification disclosures (always a possibility that we missed it somewhere)."

    For purported "extensive due diligence," did Copperfield happen to see the 10-Q/A filed on 1/14/11 (one day after the original 10-Q filing)??? This amended filing corrects the mistakes and matches the 8-K. It clearly says on p.1 of the 10-Q/A, "This amendment corrects certain typographical errors within the “Net revenues” discussions in the MD&A."

    This type of purposeful misleading analysis is why Copperfield is an outright fraud.

    The second revenue accusation has to do with not being able to reconcile earlier SSD figures, before it was a standalone segment. Copperfield accuses OCZ, claiming, "Our guess is management moved SSD revenues to PSU in 2010 to overstate SSD growth."

    Without going through all the specifics, Copperfield's work is flawed because the old segment breakdown included a category called "SSD/Flash Memory Storage" and another called "Power supplies." The new (current) segment set is now "SSD" and "PSU/Other." Clearly the "Flash Memory Storage" is principally the "Other" which got moved over and is now grouped with PSU. Through Copperfield's limited understanding of OCZ's actual products, he has failed to account for USB thumb drives, which, while made with flash memory, are very very different from SSDs and deserve to be in a separate segment. When OCZ was just getting started in SSD years ago, it made sense to group these together, but as SSD grew, this was a logical split.

    So, comparing these two is not apples to apples, which is precisely why OCZ provided the historical figures on the new basis, so we would have an accurate picture of the SSD business standalone. Once again, Copperfield's dirty trick has been revealed.
    Apr 20 09:52 PM | 5 Likes Like |Link to Comment