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Ebix Inc. Message Board

  • jaquecroissant jaquecroissant Mar 7, 2013 11:05 AM Flag

    Here is that SNL report revealing Daniel Yu (aka Gotham City Research)

    Just for anyone that hasn't already seen this:

    By Joel Poelhuis
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    Ebix Inc. (EBIX-US) $ 15.50
    Fidelity Management & Research Co. Boston, Massachusetts
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    Last Updated: 3/7/2013 10:31 AM
    Misc: Ebix Inc. (EBIX-US) 2/21/2013
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    New details throw additional light on the origin of a report that sent shares of Ebix Inc. reeling.

    Gotham City Research LLC, which attacked Ebix's accounting and tax practices, was registered in Delaware on Feb. 13, only eight days before the release of the report on Feb. 21. The author disclosed a short position in Ebix on the financial blog Seeking Alpha but did not disclose his identity. While a Gotham City Research representative reached by SNL declined to give his name, Edward Ketz, a Penn State University accounting professor cited in the report, said Daniel Yu contacted him in regard to the report's discussion of the practice of booking deferred revenue as accounts receivable.

    Yu is a well-known short seller who has previously targeted Green Mountain Coffee Roasters Inc. and Sino-Forest Corp.

    An unidentified representative of Gotham City Research characterized Ebix's response to the allegations as inadequate in remarks to SNL. An Ebix spokesman said the company does not have further comment on the matter.

    In an interview with SNL, Ketz said Yu did not mention Ebix specifically in their email conversation about deferred revenue accounting that contained the remarks cited in the report. The professor clarified that his comments were meant in a general sense and said he has not investigated Ebix's particular practices regarding accounts receivable and deferred revenues. Ketz said Yu later revealed he was investigating Ebix in a phone call, after Ketz happened to mention that he had separately looked into Ebix's accounting for its acquisition of PlanetSoft. According to Ketz, Ebix revalued PlanetSoft's contingent liabilities after the acquisition without a corresponding adjustment to goodwill. He told SNL that the mistake involved a small sum and may not be material.

    Gotham City Research says it began investigating Ebix after a shareholder lawsuit was allowed to proceed, citing an asymmetry between the opinion expressed by a judge in the case and the market's perception of Ebix.

    This is not the first time Ebix has faced allegations of questionable accounting practices from an anonymous source. In March 2011, a report from a pseudonymous author on Seeking Alpha sent shares spiraling more than 24%. The post raised the prospect that tax arbitrage strategies employed by Ebix may be illegal. More recently, shares fell sharply after Bloomberg News reported in November 2012 that the SEC was engaged in a yearlong investigation into the company's regulatory filings. The article cited three unnamed former employees who said they were interviewed by the SEC and an unspecified fourth source "with direct knowledge of the probe." Ebix said at the time that it was not aware of any SEC investigation and called the claims "a complete lie."

    The largest Ebix shareholders are FMR LLC's Fidelity Management & Research Co., with a 10.56% stake as of Dec. 31, 2012, and the Rennes Foundation, with a 9.56% stake as of Sept. 27, 2012. Robin Raina, Ebix's chairman, president and CEO, owns a 5.99% stake, which includes shares held by his foundation.

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