Bloomberg News

MagicJack Sinks as Ex-CEO Rebuts Blog: Israel Overnight

January 10, 2013

MagicJack VocalTec Ltd. (CALL:US), the Israeli company down 16 percent this week after a blogger said it misstated earnings, sank to a seven-month low as former Chief Executive Officer Daniel Borislow called the posting “lies.”

Shares of MagicJack lost 4.6 percent yesterday to $14.59 in New York, poised for its steepest weekly slump since November. Short interest (CALL:US) on the stock was 13 percent of shares outstanding Jan. 8, compared with 2.7 percent for the Nasdaq Composite Index, according to research firm Markit. The Bloomberg Israel- US Equity Index (ISRA25BN) of the largest New York-traded Israeli companies closed little changed at 86.08.

MagicJack, which sells voice-over-Internet services, dropped after a Jan. 8 blog post on the Seeking Alpha website attributed to “Copperfield Research” said the company used “accounting gimmicks” to boost profits and that the ex-CEO used his common equity on margin as collateral for debt. Borislow, who relinquished his post to Gerald Vento on Jan. 1, said the post was “clear and utter lies,” in a phone interview yesterday from West Palm Beach, Florida.

The short positions will “weigh on the shares” until the new CEO updates investors on MagicJack’s new strategy, Timothy Horan, a New York-based analyst at Oppenheimer & Co. who has a buy rating on the stock, said by phone yesterday. “If they’re selling the product and the revenues and earnings are coming in, the shorts will have to cover.”

‘Public Sources’

The Copperfield post focused on Borislow’s actions as chief executive officer. Borislow “has notoriously played by his own set of public market rules” the report said. The author cited a May 18 filing (CALL:US) in which Borislow said “I regrettably had to sell shares in MagicJack for liquidity.”

In an e-mail sent to Bloomberg News, a writer who said they were the author of the post said that they were shorting MagicJack, or betting on its decline. The writer asked not to be named and said that Copperfield is based in the U.S. The Jan. 8 post was based on “information derived from public sources,” according to the e-mail. “While there is absolutely some opinion, speculation and analysis in our report, we have arduously tried to delineate those sections clearly.”

MagicJack spokesman Kari Hernandez said it was the policy of the Netanya, Israel-based company not to comment on “such a report,” when contacted by phone yesterday.

Borislow said in yesterday’s interview that the suggestion in the Copperfield post that he used his stock as collateral for debt was “a complete lie.”

‘Backward Looking’

Horan at Oppenheimer said the blog post was “backward- looking, not forward-looking.” MagicJack’s 41 percent decline since the end of the third quarter is due to a delay in delivery of the company’s new WiFi device, which was scheduled to go on sale in September, Horan said. “I feel fairly good about my estimates as long as the new device comes out,” he said.

Borislow, who founded MagicJack, took up a new position Jan. 1 to lead new marketing and product development, according to a Dec. 28 filing.

Teva Pharmaceutical Industries Ltd. (TEVA), the world’s biggest generic drugmaker, rose for a sixth day in New York after stepping up efforts to block a competing medicine by Biogen Idec Inc. (BIIB:US) from entering the market. Teva Shares traded in New York rose 1.1 percent to $38.78, after its stock in Israel closed 1.1 percent higher at 145.5 shekels, or $38.83.

Perion Networks Ltd. (PERI:US) advanced for a fifth day adding, 3.3 percent to $12.31 as Roth Capital Partners raised its 12-month price target to $18 from $15, citing expanding use of its Internet applications. Perion shares in Tel Aviv jumped 8.1 percent to 45.8 shekels, or $12.2.

Sales in 2013 are expected to exceed $110 million, Perion said in a statement Jan. 8, beating the $102 million average of two analysts’ estimates compiled by Bloomberg. Fourth-quarter revenue will reach $21 million, the company said, compared with an $18.1 million estimate.

Israel’s TA-25 Index (TA-25) rose 1.1 percent this week to 1,224.11, the highest level since Dec. 19.

To contact the reporter on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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Companies Mentioned

  • CALL
    (magicJack VocalTec Ltd)
    • $13.72 USD
    • 0.20
    • 1.46%
  • BIIB
    (Biogen Idec Inc)
    • $337.6 USD
    • 33.93
    • 10.05%
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