By Parke Shall with Thom Lachenmann
I always bring Thom in with me when I'm looking at a company that's being questioned by short sellers. He can provide the balance I need to make sure that I'm seeing both sides objectively. Eros International (EROS) is a case where we've talked about the company for weeks now amongst ourselves, initially concluding it's an outright fraud, but now pulling back our conclusions to a point where it's going to depend on the company's coming results.
The controversy over EROS over the last few months has caused shares to decline almost 66% to levels where they now sit, around $10 per share. For weeks, short sellers, led by Seeking Alpha's own Alpha Exposure, have been alleging that EROS is hiding something from shareholders, noting the company's ballooning accounts receivable, lack of cash flow, and inconsistent labeling of its films.
To read Alpha Exposure's full analysis, you can click here and scroll through their articles.
We have read all of the critical reports as well as the commentary on Twitter and other social networking financial sites. We've also read all of the company's responses and the corresponding financial statements that have been called into question.
The reason that we are commenting on EROS is that a number of institutional investors have raised their stakes in the company over the last week, prompting us to once again look at the story. We want to look at all of the items in question and try and draw a reasonable conclusion one way or the other. What we have discovered is that we do not believe there is a trade or an investment here at this point, long or short, and that we think investors may be better served waiting for more information to come out before getting involved with EROS.
