Why Ebix Shares Got Destroyed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Ebix (Nasdaq: EBIX  ) got destroyed today, dropping by as much as 32% within minutes, after Bloomberg reported that the SEC was probing the company's accounting practices.

So what: The report cites four anonymous sources, saying that regulators have been investigating Ebix's revenue recognition and internal controls over the past year. The probe hasn't been officially disclosed to the public, so if true, it would certainly be frightening for investors. However, CEO Robin Raina and Ebix's attorney, John Jordak, said the company has not been notified of any investigation.

Now what: In a press release, Raina said the Bloomberg article is "inaccurate and misleading" and defended the accuracy of Ebix's filings. This isn't the first time accounting concerns have been raised at Ebix. In March of last year, an anonymous Seeking Alpha blogger with a short position writing under the pseudonym Copperfield Research made accusations, similarly crushing shares. Bloomberg is certainly more reputable, and Ebix says it is now looking into "all avenues of recourse" against the media outlet.

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Comments from our Foolish Readers

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  • Report this Comment On November 05, 2012, at 9:08 PM, TMFDukenewkirk wrote:

    Important to note the devastating hit of -32% reversed over the next couple of hours to a mere 14% drop amid the panic. Also not coincidental perhaps that short interest is huge and an expected positive earnings release is coming in a week. Seems a lot of motivation for a well timed bit of concerning news, no? The timing strikes me as blatantly ridiculous.

    Duke, not a big believer in coincidences

  • Report this Comment On November 09, 2012, at 12:19 PM, spinindog wrote:

    Yeah, I had 4 anonymous sources tell me that many Bloomberg writers are on the payroll of hedgefund managers.

    Bloomberg is not what it used to be.

  • Report this Comment On November 09, 2012, at 12:34 PM, spinindog wrote:

    Bloomberg also wrote an article that said that the owner had sold 88% of his stake in the company.

    It was so easy to prove this article utterly false. There is no way to cover up how many shares Raina owns.

    If Bloomberg writers aren't shorting Ebix, I'm a slice of pizza.

    http://globenewswire.com/news-release/2012/11/06/502875/1001...

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