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Why Ebix Shares Temporarily Imploded

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  ) , a company that develops e-commerce solutions for the insurance industry, plummeted 30% midday after a Bloomberg report insinuated, based on persons familiar with the matter, that Ebix was under investigation for money laundering. Shares have since rebound to a single-digit percentage loss.

So what: According to Bloomberg, today's news that investigators are closely examining Ebix's cross-border transactions follows word in June that the U.S. Attorney's office in Atlanta was investigating the company for "allegations of intentional misconduct." Ebix fired back at Bloomberg by labeling the report as inaccurate and damaging to Ebix shareholders, and declaring itself innocent of the allegations of money laundering.

Now what: I don't think investors have a choice but to watch idly from the sidelines. Given the ongoing SEC investigation into the company, as well as the PR damage that this investigation may cause its business, there are far too many question marks for shareholders to risk their hard-earned capital. I'd certainly encourage adding Ebix to your watchlist, as a resolution from the SEC's poking and prodding could result in big upside potential, but for now I'd suggest erring on the side of caution.

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Read/Post Comments (5) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On August 06, 2013, at 5:36 PM, p2i wrote:

    My suggestion is to buy Ebix. Greg Farrell's new article says nothing. Read it and analyse its content. He says nothing new but includes a bunch of BS about the foundation and its directors. He has great timing as usual just before an earnings report.

  • Report this Comment On August 06, 2013, at 6:25 PM, bobyk3 wrote:

    SEC investigation will expose the shortseller behind the false Ebix stories. Whoever it is will end up in jail.

    Be greedy when others are fearful. Ebix business is solid with little competition - makes money from EACH transaction!

  • Report this Comment On August 06, 2013, at 7:50 PM, lottaluck wrote:

    After hours the share price dropped and a Bloomberg spokeswoman said the news agency stood by it's report.The FBI asked about funds the company wired to India,Singapore and Sweden.

    Ebix has been dogged by allegations recently and this is taking it to a whole new level.

    I wish people would stick to facts and watch what happens rather than blame others for what is happening to Ebix.Bloomerg are standing by their report of allegations of money laundering.The volatility in this stock will be high in the coming weeks/months and there is much downside to come.

  • Report this Comment On August 07, 2013, at 9:47 AM, bobyk3 wrote:

    If you bought IMAX when SEC investigation began, you could have made nearly 700% returns!

    Wed Jun 29, 2011 6:11pm EDT

    * Imax says probes related to timing of revenue recognition

    * Inquiries started in 2006, SEC made it formal last year

    (Reuters) - U.S and Canadian securities regulators have ended probes of IMAX Corp and will be taking no further action, the big screen movie company said in a regulatory filing on Wednesday.....Imax said at the time that related legal and other costs were hurting its cash position and profitability.....Imax's stock has risen steadily since early 2009 as the company expands its global presence into emerging markets such as China.

  • Report this Comment On August 22, 2013, at 3:46 PM, AnsgarJohn wrote:

    Is what Buffett calls "cat risk" risk of catastrophy.

    Only invest if you are convinced there is no fire where this is smoke, not just based on hope.

    Buffett did that with American Express: his own research.

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