Ebix Rolling Into Trouble (Podcast)

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About: Ebix Inc (EBIX)
by: Behind The Idea
Summary

We continue our Kase Learning Shorting Conference coverage with an interview with Mads Thamsborg of Bodenholm Capital.

He and his firm are short Ebix, a name familiar to Seeking Alpha readers as a bull/bear battleground for much of this decade.

What's changed? Thamsborg points to a change in auditor and a decay in underlying growth.

But mostly, this is a roll-up story beginning to unwind, in his view, which leads to a continued opportunity.

By Daniel Shvartsman

Behind the Idea is focusing on the Kase Learning Shorting conference in the coming episodes. Mike Taylor and I attended the conference on Monday to watch fund managers from around the world present short ideas for the current market. It seems prescient at a time where interest rates are rising and volatility has returned to being a presence rather than a specter.

Yesterday we published a conversation with Gabriel Grego and Nate Anderson about Aphria (OTC:APHA). Today we're speaking with Mads Thamsborg of Bodenholm Capital. He pitched a short case for Ebix (EBIX). Ebix has been a long-running battleground, but one which appeared to have a rendered verdict - the bulls won, I thought.

2018 has proven that there's still more to come in the story. The stock was largely rangebound until October, when it abruptly fell off a table, more than the market sell-off can explain. The immediate cause appears to have been a change in the company's auditor, perhaps bringing accounting concerns of the past back to investors' attention.

Is that all there is to the story? Thamsborg argues that there's an even more classic issue here - Ebix's roll-up story is starting to unwind, with all the hallmarks of that sort of short case: slowing organic growth, a mishmash of businesses with no obvious synergies, and a leveraged balance sheet. I spoke with him the week before the conference, and we discussed the ins and outs of the idea, what his views are given the stock is moving, and how he handles high short-interest stocks.

Topics Covered:

  • 2:15 minute mark – Thamsborg's background and getting into the EBIX short case
  • 4:45 – Why does this work as a short now when EBIX has been a battleground so long (and a runaway train for shorts)?
  • 9:45 – IPOing their Indian business, and the threats to the short thesis
  • 13:45 – What’s going on with the stock now, and how does that change the positioning for the short?
  • 16:45 - Mechanics of starting the short given what's happened in the past with Ebix
  • 19:45 – Thoughts on shorting battleground or high short interest names
  • 23:00 – What shorts have gone wrong?

We host Behind the Idea on libsyn. We're also available on SoundCloud, Google Play, Stitcher, and Spotify. Send us guest requests, questions, feedback, or complaints to btipod@seekingalpha.com.

We are speaking with other presenters and posting a recap of the conference, both in article form and in a podcast, so stay tuned for that.

What are your thoughts on Ebix and on the short case presented here? If you're still long - and my sense from reviewing our coverage is that most authors and commenters are - what do you think of the leverage or the roll-up concerns? What are you looking for from the company in the coming quarters? Let us know below.

Editor's note: Please find a transcript of this call here. This is not a perfect transcript, but should be a helpful guide.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Mads Thamsborg, our guest, is short EBIX. Nothing on the podcast should be taken as investment advice.