Ebix Inc. (EBIX:US) fell the most in almost 11 years in Nasdaq trading following a report claiming the company hid a $65.8 million related-party loan to its Singapore subsidiary from U.S. regulators.
The report, posted on the website Seeking Alpha by Gotham City Research LLC, said the loan appeared in a disclosure form filed by Atlanta-based Ebix’s Singapore unit and was never disclosed in the company’s U.S. filings.
Ebix, which makes software for the insurance industry, plunged $5.07, or 27 percent, to $14 today, the largest one-day drop since July 2002. The shares have lost (EBIX:US) 41 percent in the past 12 months, putting the company’s market capitalization at $521.9 million.
The related-party loan originated in 2009, according to the Singapore filing, which was obtained by Bloomberg News. The subsidiary’s 2010 financial statements, which were filed last March -- more than two years after the end of the reporting year -- also listed the loan.
The company hasn’t disclosed the related-party loan in any of its 10-K filings (EBIX:US) in the U.S., according to the Gotham City Research report. No mention of the Singapore loan was evident in a review of Ebix’s U.S. filings. The company has yet to file its 10-K for 2012.
At $65.8 million, the amount of the related-party loan exceeds Ebix’s reported net income for 2009 and 2010, and falls just short of the $71.4 million in net income reported for 2011, according to the company’s filings with the U.S. Securities and Exchange Commission.
Steve Barlow, an Ebix spokesman, said yesterday that he was confident the company’s filings were in order.
In November, Bloomberg News reported that the SEC had been investigating Ebix’s accounting practices. That investigation, conducted by attorneys in the SEC’s Atlanta office, is continuing, said a person who had been interviewed about Ebix in recent weeks.
An SEC spokeswoman, Florence Harmon, declined to comment. In November, Ebix said it wasn’t aware of any SEC investigation.
According to the Singapore filing, the $65.8 million loan “represents amount due to a related company for the purchase of intangible assets.” The loan carries a 9 percent interest rate “and is not expected to be repaid within the next 12 months,” according to the most recent filing, for 2010.
A copy of the Gotham City Research report was provided to Bloomberg News prior to publication. The author, who asked not to be identified by name out of concern about legal action from Ebix, said he had a short position on the stock.
Short interest (EBIX:US) in Ebix stood at 13.02 million shares today, the highest since July 2011.
The short interest ratio, or the number of short shares divided by the average daily volume, was 44.3.
The Gotham City Research report isn’t the first time Ebix shares have been attacked anonymously by a short-seller. On March 22, 2011, a blogger writing under the name “Copperfield Research” posted a critical analysis of the company’s earnings on Seeking Alpha. The article described Ebix as a “house of cards.”
Two days after that blog post, Ebix’s stock fell 24 percent to $22.52, on volume of 15 million shares. In the days before the selloff, average volume had been less than 1 million shares. The company’s market capitalization shrank that day to $878 million from $1.2 billion.
Ebix, in a statement dated March 25, 2011, said: “It is management’s opinion that this post misrepresents and distorts facts not relevant to the company’s current financial position, long-term growth prospects and management policies.”
The company said in the statement that “the Seeking Alpha post appears to have been issued specifically to cause a decline in the company’s stock price to support the increase in the short interest in the company stock, and purchases of stock options related to these short positions.”
Barlow, the Ebix spokesman, didn’t respond to requests for comment today.
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