By Sam Boughedda
Activist short-selling firm Hindenberg Research released a short report on US technology company Ebix, Inc. (NASDAQ:EBIX) on Thursday.
Ebix focuses on payment services, travel, and IT in India and has a market cap of approximately $800 million.
Hindenberg stated that the company planning a $4.5 billion IPO of its 100% owned Indian subsidiary, EbixCash, is a "race against the solvency clock."
"The EbixCash IPO has faced questions and delays for the last three years. The company had previously missed targets of 2H 2019, Q2 2020, “towards the end of 2021” and Q1 2022 as prior planned dates for the IPO," said Hindenberg. "In February 2021, Ebix’s auditor, RSM, resigned because Ebix wouldn’t provide evidence regarding “unusual transactions related to the Company’s gift card business in India.""
Hindenberg claim in the report that since the auditor's resignation, unusual transactions have accelerated.
Questioning the company's revenue, Hindenberg wrote: "The top customer reported just $151,000 in sales in its most recent financials (2020) but has supposedly accounted for $46 million in revenue to EbixCash in FY 2021. We visited its official corporate address and found it was no longer in use. The entity’s key product was an app with only 1000+ downloads and 5 reviews, the last of which was 2018."
The short-selling firm stated several other reasons for their short position in the stock, concluding: "We think a substantial portion of EbixCash’s gift card revenue is non-existent. Consequently, we expect the EbixCash IPO will flop or fail. Given Ebix’s massive near-term debt load in a rising rate environment, we see significant solvency risk over the next 12 months."
Ebix stock has plunged more than 40% in Thursday trading.