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Ebix Inc. Message Board

  • jackburden02 jackburden02 Jul 2, 2013 12:08 PM Flag

    My three issues

    Does anyone seriously see this trading anything but horizontal range bound until more details of the investigation are known? I don't see who would seriuosly place a large bet on such a binary outcome unless it was within the 'speculate' portion of a portfolio.

    I have three major issues with this asset:
    1. Management is incompetent at best, guilty at worst
    Could they at least adress the issue at hand - acounting and taxation. They've had how many years to do this and have made no real effort to counter the attacks. Try and analyst call, investor presentation, additional disclosure, reputable auditors, anything really.
    2. ROIC is falling
    Once (dis)integrated, it is dificult to tell whether accretion has occured - you have to look at ROIC (adjusted for buybacks,dilution, etc). Therefore, managemenst should try to illustrate value creation. Try an investor presentation that demonstrates actual cross sell, customer retention rates, contract renewal charts with dates and associated revenues, new customer wins, anything really... just not the 'I'm really good' storyline. Who wouldn't say that?
    3. Tax strategy is likely 'soft'
    Given the auditors and lawyers experience levels, I can't imagine that EBIX has a bulletproof international tax strategy. This doesn't mean that avoidance or impropriety has(n't) occured, it just means they are likely more vulnerable than APPL, MSFT, et al. I'm sure that the government / IRS would like to make an example of someone... and EBIX is a much easier target than the aforementioned.

    I welcome discussion on the above, but from where I'm sitting, this is uninvestable in the near-term. Without some increased substance from management, this really has too many unknowns. The numbers generally look good, but the softer issues are a real nightmare.

    Sentiment: Sell

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    • I'd like them to address why the GS deal was called off. There are two possibilities: (1) GS was told by someone who mattered that the takeout price was too low, or (2) something else. If 1, the price could jump to be in the 15's, at least where it was before the buyout was announced. If 2, then we could be anywhere from low single digits to 15, depending on what the reason was.

    • Well Mr Yu or I mean Mr Burden, this reminds me of the time Porsche reinvented the short squeeze in 2008. Hedge funds were shorting VW while Porsche was buying. Porsche accumulated 32% by stock options. What a whiny hedge fund group when the news broke that Porsche wanted 75% of VW and there were no shares to cover and the price went from 200 euro to 1000 euro. Goldman is buying stock and maybe options. Insiders won't sell. What's going to happen when Goldman announces its holdings and its intent to buy even more?

    • I think there will be another offer long before all of these issues are sorted out, and I can bet I know who will be making it. The way I see this likely playing out is as follows. The company will continue to retire a large percentage of the float with its $100m buyback. Goldman will continue to accumulate as many shares as it can at less than 50% of what it agreed to pay at $20 per share (which it has been doing once it walked away from the merger). Between these two things happening at once, the amount of outstanding shares which are not owned by Goldman will drop dramatically allowing Goldman to purchase the remaining shares for a much higher price than $20 and still pay a lot less than it originally agreed to pay in the merger which will make the other shareholders happy, and the company will go private as originally planned which will make Raina and the Board happy. Goldman knows everything it needs to know about all of these issues after it has spent millions of dollars and about 6 months doing a very extensive DD with top level financial people. The issues about EBIX's accounting and tax strategy, etc. were all known issues when Goldman began its DD and rest assured that Goldman explored these issues in great detail and was satisfied with the information it learned BEFORE it agreed to the merger at $20 per share. Nothing new here except for an Attorney General criminal investigation which is why Goldman walked away. Now that cat is out of the bag, I would expect Goldman to wait to pull the trigger on a new deal until the criminal investigation resolves itself and then make an offer.

    • I'm sure most everyone can identify with these issues. It is for that reason that EBIX is trading at less than $10 rather than $30. It is all about risk / reward. I see this as a max downside to $6 and max upside to $22. That alone is my reason for taking the risk. RR has already proven he wants to go private or sell. We know that GS fully vetted the accounting issues. And...we know that shorts have openly published the gloom and doom hit pieces in SA and Bloomberg. So, sit back, relax and one morning you will awake to the news that EBIX has a buyer...at which point you will be handsomely rewarded for taking the risk. I'm sure there will be a few bumps in the road along the way.

    • As you have pointed out, there are multiple issues with this company. Beyond the SEC / IRS / Accounting is the fundamental issue of what is the business plan going forward? Although many acquisitions have occurred, it is difficult to sort out just how successful they have been or how well they have been integrated. And why did the board first say it is in the stockholders best interest to go private and then do a 180? What the heck happened? The allegations of a pending SEC investigation were well known before GS signed on. I believe there is a lot more to the story why they both walked away and released each other.

    • If any of those things had happened, the stock would ve been trading above $13 already. So, I understand that there are a lot of uncertainties but you will be heavily rewarded for taking that risk. And if you are a long term investor then Keep dollar cost average your position in EBIX on any weakness and hold it for 2 yrs. You will make a lot of money. The bigger problem with you is lack of discipline and patience. :)

      Sentiment: Strong Buy

    • I agree with the sideways movement of stock price until some kind of news be it good or bad.
      I also believe no one makes an offer until all allegations are cleared if one is made at all.
      Too many quesions here.

 
EBIX
14.75-0.07(-0.47%)Sep 19 4:00 PMEDT

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