July 1, 2019 – SEC withholds FOIA documentation as it could reasonably be expected to interfere with enforcement activities, and disclose identities of confidential sources and whistleblowers.
Report Download Link
On December 11, 2018, Viceroy released our preliminary report on Ebix Inc. (NASDAQ:EBIX), within which we reported on numerous historical and potential ongoing regulatory investigations into the Company and its conduct internationally. You can find our report here:
On June 20, 2019, the SEC responded to a Freedom of Information Act document request, within which the SEC has withheld requests pursuant to 5 U.S.C. § 552 (b) (3), (6), (7)(A), (7)(C) and/or (7)(D).
This document mirrors responses from the SEC’s Office of FOIA Services relating to MiMedx. Upon our dissemination of this report, the Company subsequently admitted to investigations by the SEC, DOJ and VA, amongst potentially numerous other acronyms.
May 7, 2019 – For completeness, please find Ebix’s legal letter to Viceroy, dated April 1, 2019, below:
Ebix Legal Letter to Viceroy – April 1, 2019
We are responding to Ebix’s claims in full on twitter:
JANUARY 7, 2019 – Ebix has characteristically ramped its press-release flow since the publication of Viceroy’s initial report and continued its acquisition spree. This report concerns management’s disregard for corporate governance, lack of transparency and due diligence.
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Ebix Inc (NASDAQ: EBIX) have come out with multiple acquisitions and service “deals” since our multiple publications on the Company. On further investigation, we found that one of Ebix’s announced contracts had not yet been finalized. Ebix retracted its press release about a Dubai Forex Services contract: investors were misled on the status of the contract.
This is a major red flag, and exaggerates what we believe is an already extremely high risk investment strategy at Ebix.
Investors will note that Ebix have avoided commenting on the audit committee’s recommendation for Ebix to retain the services of Top 4 Auditor for regulatory reasons. We can only assume the Top 4 preferred to give ad hoc accountancy advice rather than full audit responsibilities.
This report will also dive into Ebix’s near-miss attempted acquisition of now-insolvent Patriot National, which the company was looking to acquire just before its spectacular collapse.
Ebix have so far decided to have fireside chats with investors while referring to our work as an old short thesis. Ebix have refused to account for Robin Raina’s poison pill bonus, the treatment of goodwill and the accounting irregularities.
Our research into Ebix is ongoing however we believe the information puts into context Ebix’s recent announcements. We will shortly publish further data pertaining to the Ebix group’s internal cash movements.
Publicly available financials suggest the Robin Raina Foundation shares similar financial discrepancy issues and poor disclosure practices as Ebix.
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One of the Ebix’s CEO’s biggest self-promotion points is his commitment to charity. Kudos.
As part of our due-diligence process, Viceroy has conducted background checks into Ebix’s directors and their ventures. When diving into the Robin Raina foundation, we found inconsistencies between Robin Raina’s self-promotion of the Robin Raina Foundation (RRF) and the financial accounts of the foundation and its affiliates, and licensing issues across the US and India.
DECEMBER 13, 2018 – Ebix’s Mumbai office was “searched” by Indian tax authorities in Q3 2018. In other news, CEO Robin Raina claims Ebix has never “been on the wrong side of any regulatory or tax authority”.
The Taxman Cometh – Report Download Link
Viceroy released its preliminary report on Ebix – titled Goodwill Hunting – on 11 December 2017, the contents of which we also discussed at the Kase Learning conference in New York on December 3, 2018.
This report will address the totally inadequate response Ebix issued on December 12, 2018, which was substantially an attempt at authority bias by CEO Robin Raina. Accordingly, we will also shine a light on the statements Raina decided to include in this press release, which we believe to be extremely misleading.
- Ebix acknowledged our report via a press release on December 12, 2018, however CEO Raina would rather issue a hollow press release than address the issues Viceroy have raised in our preceding report.
- Robin Raina claims Ebix has “never been on the wrong side of any regulatory or tax authority”. This is inconsistent with:
- Ebix’s Mumbai office being subject to an undisclosed “search” by Indian Tax Authorities for suspicion of tax evasion in late August 2018;
- Ebix currently subject to a tax audit by the Australian Taxation office since at least 2016;
- Ebix historically settling an IRS dispute for >$20m;
- Ebix being subjected to a prolonged SEC investigation;
- Ebix being subject to a possible ongoing DOJ investigation;
- Contrary to Raina’s claims, it appears his conduct was subject to regulatory scrutiny even prior to his rise to CEO. Ebix’s former auditor, Arthur Anderson, was charged by the SEC for improper conduct and fraud relating to the audit of Ebix’s revenue recognition practices at a time where Raina was VP of Sales and Marketing and COO.
- Robin Raina claims Ebix has had “no differences with any statutory or consolidated auditors across the world in the last two decades”. This is objectively, and verifiably false, as we have already reported.
- Ebix detracts attention to concerns raised through reinforcement of its commitment to stock buybacks, of which it has announced US$330m since 2015 and only fulfilled US$187.169m.
- Viceroy is writing to the relevant debt providers shortly with these and other material concerns.
Viceroy’s original report can be found here:
Ebix’s press release on December 12, 2018 can be found here:
Accounting irregularities, undisclosed tax investigations, auditor shuffling, poison pill to protect short sellers: welcome to Ebix.
DECEMBER 11, 2018 – Following on from our presentation of the same title, Viceroy are releasing our preliminary report on Ebix, Inc (NASDAQ:EBIX). Our investigation has uncovered accounting discrepancies dating as far back as 2008 to present day as well as several other red flags.
Report Download Link
Filings.zip – Download Link
- Numerous accounting discrepancies in years 2013 to 2018 regarding the recognition of goodwill and acquisitions within the Ebix group. These discrepancies have largely gone unnoticed due to the delay in local filings being signed off and the multi-jurisdictional nature of these transactions.
- Over the course of our investigation we uncovered evidence of what we believe is a scheme to incorrectly book revenue and earnings. We believe this is done through the shuffling of assets from one subsidiary to another while improperly booking internal revenues, and contingent consideration “cookie jar” accounting.
- We are limited by the recency of the available subsidiary filings. We believe this behavior continues to take place. Ebix’s acquisition spree in India further muddies the waters.
- Ebix announced a change in auditor to T.R. Chadha from Cherry Bekaert (of MiMedx fame) after reporting material weaknesses regarding purchase and income tax accounting, pursuant to appointing a big four accounting firm in Q1 2019.
- T.R. Chadha has never audited a US-listed entity and was auditor of several Indian Ebix subsidiaries in which there appear to be several accounting discrepancies.
- Cherry Bekaert was subject to a scathing PCAOB inspection just weeks before its replacement.
- Ebix’s subsidiary structure is excessively convoluted and opaque. The subsidiary structure includes holding companies in geographies where obtaining financials is near impossible. Many subsidiaries are held under a UK entity, Ebix International Holdings, which has only ever filed locally as a dormant company and recently received a warning of compulsory dissolution for failing to file accounts.
- Ebix’s joint venture with Vayam Technologies, Ebix Vayam, accounts for 25% of Ebix’s receivables and only customers are Vayam Technologies themselves. Vayam appears never to have settled its receivables and the entire JV is funded by Ebix at an 8% interest rate, payable in receivables. This appears to be a scheme through which cash is injected in to make paper gains of margin plus 8%.
- Ebix CEO Robin Raina is entitled to a massive payout in the event of an acquisition at the expense of shareholders. This poison pill protects short-sellers from takeovers by attaching an unreasonable premium to the company. This arrangement and its predecessor are currently subject of ongoing shareholder litigation.
- The company’s debt-fueled acquisition binge in India was originally intended to create and list an Indian payments entity. This appears to have turned into an unfocused roll-up, with more and more scattered businesses being added to the Ebix stable. Despite these additions, Ebix does not break out its revenues from these disparate income streams.
- Ebix’s has been subject to an undisclosed tax audit by the Australian Taxation Office since 2016, we believe due to the transfer of Telstra eBusiness Exchange assets to Ebix Singapore, and non-arm’s length transactions.
Due to the delay in availability of subsidiary accounts, and the rapidly expanding nature of the company’s operations we are unable to quantify a base downside. We believe it is highly likely given the progress of the shareholder litigation that regulatory authorities including the SEC open or reopen their investigations into the company. Accordingly, we believe that Ebix carries a high investment risk.
The Alchemy of Creating Profits
Ebix Presentation – Download Link
Viceroy’s presented Ebix at the Kase Learning Conference on December 3, 2018. We will shortly release a full report into our findings.
Summary red flags:
- Change in business model (IT providers to insurance v. finance sector) without visible synergies or management experience.
- Accounting discrepancies suggests EBIX is booking external revenues on transactions between its subsidiaries: this occurred in 2014, 2015, 2016, 2017 across multiple geographies (UK, Singapore, India, Dubai, Mauritius).
- The company has a growing unbilled receivables balance:
- 50% from by EBIX’s India JV (Ebix Vayam Technologies) whose only customer is the JV partner (Vayam): it appears to have no other customers, and 446 days of receivables.
- Rapid change of company auditors, most recently the replacement of Cherry Bekaert with T.R. Chadha, an Indian auditor with no history of auditing a major US-listed entity.
- Unnecessarily intricate and opaque subsidiary structure, with very little insight provided to investors. Many assets are being held in opaque geographies and have been transferred with no disclosure or justification.
- The CEO has financially engineered an >US$825m “poison pill” to prevent any takeover by mandating a large payout to himself in the case of such a takeover.