If Robin Raina failed to hire world class accounting and investor relations firms when the company was under attack on all sides, why would you believe that all of a sudden he is about to do so? No world class IR firm would ever stay on board the way the last guy did.
Because you assume a conclusion which may not happen. It may not shake out in the long run and instead EBIX's stock does not recover, growth stalls because they are tapped on credit and cannot use their stock as currency to resume their main engine for growth by acquisition, and company falters. Your view is the same view RR has had the last three years and look where we find ourselves now. Do you want EBIX to be trading at these levels for yet another few years or even longer. I sure don't! If growth does not resume, that is where EBIX's share price will be. Do you think the countless publicly traded companies spend millions on PR because it is all BS. PR often provides as much shareholder value in connection with publicly traded companies as business performance both in the long and short term. PR has all to do with what kind of multiple a company is given and how much investment capital is attracted to a stock. The idea that overall in the long run valuations catch up and work themselves out is great to read in a text book, but the reality is simply this often is not the case, especially over the last few decades in the market. Stocks are only valued both short term and long term, in part, based on financial metrics, and perception now has a major role to play in valuation of public companies. Number crunchers just cannot seem to understand this.
$200m gives RR all kinds of options he otherwise would not have. I think he is also realizing that his prior strategy did not work and adjusting it to directly take on this short attack. You can say a lot of things about RR, but one you cannot say is that he is stupid. Remember, he created this business model and transformed an archaic, money loosing paper driven business into a high tech profitable company which several years go was among the fastest growing companies in the world. I take my hat off to him here. I think he finally has a plan that will work and end this short attack and let EBIX get back to business and resume its growth strategy. None of this could be possible without the $200m revolver he closed with perfect timing. A smart man realizes when to no longer force a bad hand and chance strategies. It appear RR is now focused on ending this short attack and putting everything else on the back burner, including acquisitions. As said on the CC, he is committed to buying back stock over acquisitions which is obviously directed at the shorts. He is also an extreme miser so it pains him to spend the cash on a Big 6 auditor and top IR firm, but he sees that this must be done to take on the shorts. This is a definitely the strategic change that I have been hoping for.
He's not only smart but he doesn't run scared. He's a calculating competent methodical individual who is also patient. Shorts wanted him to counterattack early without preparation and discredit him. However, he took his time to prepare for battle.
Stuart, great breakdown here... I know you have been with EBIX for much longer than me and applaud your patience... I feel that this strategy will work and as I had said before, the best aquisition that ebix can make right now is itself.
Really if you think about it what other company out there can they purchase at a 50% or greater discount which will add to EPS immediately?
I was definitely impressed by this change in thought process in Raina. Reminds me of Apple when it was at $390. Seems like they finally got a clue - hire a big 4 auditor, improve internal controls, buy back stock, hire better PR. Ebix reminds me of IBM with their strategy right now. Eventually it will pay off for the long term shareholder.
I hope Ebix becomes a dividend growth stock. I will be anticipating a dividend hike after this next one. Even if small, that kind of commitment will keep me with Ebix given its strong moat and fundamentals.
In terms of IR firms there really aren't any ethical canons. They will work for outright criminals.
Accounting firms hold to higher standards but unless there are lying to the firm or clearly breaking the law the worst that can happen is a higher fee or a more intrusive audit.