April 28, 2015

GOTHAM CITY RESEARCH’S OPINIONS:

  • EIGI shares will go to $0.00 per share, as the company will struggle to service its debt. Normalized EBITDA margins do not cover interest expense.

  • Recent years’ reported EBITDA benefited from attracting Blinkx-like revenue (spam/malware, terrorism, etc.).

  • EIG profits at the expense of its customers (service outages, poor customer service, etc.).

SUMMARY OF FINDINGS:

  • 40%-100%+ of EIGI’s reported profits are suspect.

  • 2014 Average Revenue per Subscriber (ARPS) actually declined -13%. EIGI’s 10K claims ARPS grew +11%.

  • Organic growth overstated ~3x. We calculate organic growth to be ~5.6%, not 13.0%-15.0% as EIG claims.

  • Directi’s revenues per the Indian filings are 30%-67% lower than reported in EIGI’s 10K.

  • Directi revenue figures within the EIGI 10K do not add up.

  • EIGI paid 17% of its ’12-’14 EBITDA to a related party tied to the CEO. The related party seems to be Endurance.

  • No international revenue disclosure...

Gotham City Research initiates coverage on Let’s Gowex SA, with a price target of € 0.00/share (100% downside)

SUMMARY OF OPINIONS:

  • Gowex shares are worth €0.00 per share.

  • Over 90% of Gowex’s reported revenues do not exist. We estimate GOW’s actual revenues to be <€10 million.

  • The shares will be suspended, just as Pescanova’s shares were suspended.

SUMMARY OF FINDINGS:

  • Gowex’s actual Wireless revenues are at most 10% of what GOW reports in its financial statements.

  • GOW’s Hotspot network it owns or manages is ~5K in size. CEO told us 100K+ & JBCapitalMarkets estimates 35K.

  • GOW’s audit fee is €40,000, which makes sense if Gowex’s actual revenues are only 5%-10% of reported revenue.

  • 90% of Telecom revenue originated from undisclosed related parties, tied to GOW CFO & an early investor. We have evidence Gowex’s largest customer was really itself.

  • Gowex Telecom (i.e. Iber-x) website has not been updated in years. It appears to be no longer in business.

  • ...

April 22, 2014

Gotham City Research initiates coverage on Quindell PLC, with a price target of 3p/share (92% downside)

SUMMARY

  • 42%-80% of Quindell’s profits are suspect, as we are unable to reconcile the whole with the sum of the parts.

  • Quindell was little more than a country club until 2008/2009, yet QPP somehow began reporting Microsoft/Google-esque profit margins in 2010/2011.

  • 26%-43% of Quindell’s 2009 and 2010 revenues came from Clickus4.com, a subsidiary owned by CEO Robert Terry.

  • 41% of Quindell’s 2011 revenues came from an undisclosed related party (controlled by a QPP executive).

  • 10+ acquisitions lack economic substance. Several of the acquired companies are little more than paper companies.

  • QPP’s largest telematics customer is itself (via subsidiaries Himex & Ingenie), accounting for 61% of 2013 revenue.

  • 99% & 80% of Himex’s 2012 and 2013 balance sheets are seriously deficient (Himex is QPP’s largest acquisition).

  • Former executives allege Himex/Navseeker...

February 18, 2014

Gotham City Research initiates coverage on Blucora, Inc (a.k.a. Infospace).

“Google’s first step is easy: Fire InfoSpace (a.k.a. Blucora). Google doesn’t need InfoSpace, and there’s zero reason for this relationship to continue in light of InfoSpace’s repeated failings.”

– Harvard Business School Professor Benjamin Edelman, author of The Darker Side of Blinkx, and the “Doogie Howser of online investigative work” according to former federal prosecutor Richard Boscovich

GOTHAM CITY RESEARCH’S OPINIONS

  • +60% of BCOR’s revenue will evaporate in coming quarters, as Google realizes it is better off without BCOR. Google and Yahoo can walk away from Blucora any time.

  • At least 50% of BCOR’s traffic is derived from malware, click fraud, illicit traffic (e.g. child pornography), and otherwise suspect traffic.

  • Blucora and its partners’ practices will receive scrutiny from Google, advertisers, FTC, DOJ, FBI, IRS, &/or the SEC.

  • BCOR shares are worth no more than $5.00/share, and <$1.00...

November 14, 2013

Gotham City Research initiates coverage on Tile Shop Holdings, Inc.  Summary of Gotham City Research’s findings:

  • Tile Shop’s 2013 LTM earnings are overstated by over 200%. TTS’s actual 2013 LTM EPS is closer to $0.18/share.

  • TTS will restate several years’ historical results as a result of the issues covered in this report.

  • The company has used its China-based undisclosed related party and improper accounting to overstate profits.

  • Gross margins will continue to decline through 2014, as TTS must reverse prior years’ accounting overstatements.

  • Tile Shop’s shares are worth no more than $1.54-$3.34/share, implying 84%-93% downside.

  • TTS’s creditors will likely restrict additional indebtedness & capital expenditures until TTS’s accounting is corrected.

Summary of the Bases of Opinions:

  • TTS’s largest supplier, Beijing Pingxiu, is an undisclosed related company, and accounts for 20-30+% of TTS’s COGs.

  • Beijing Pingxiu is secretly controlled by Fumitake Nishi...

September 19, 2013

Based on new information we’ve obtained, Gotham City Research believes:

  • Ebix improperly financed $100+ million of acquisitions and stock buybacks, tax free, under the guise of a bogus intercompany asset sale, between Singapore & India.

  • Ebix Inc. & its subsidiaries’ filings are materially incorrect. Newly identified accounting irregularities, in sum, exceed 42% of Ebix’s market capitalization ($169+ million in irregularities).

  • Swedish pre-tax income is less than %1 of the amounts claimed in the SEC filings, according to Swedish filings.

  • BDO Sweden was unable to confirm that any of the dealings between Ebix’s Swedish subsidiary, Ebix Singapore and Ebix Australia, ever actually occurred.

  • Ebix meets the requirements for an “Event of Default”, per Article VII (c) of the Credit Agreement.

  • Current shareholders are likely to recover little to no value, once the USA & Ebix’s creditors enforce their rightful claims.

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