This is today’s story:
https://secure.marketwatch.com/story/ubiquiti-shares-hammere…
This is the story about the missing $47 million in 2015:
https://blogs.wsj.com/cfo/2015/08/07/cfo-less-ubiquiti-trick…
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You are taking substantial risk and the vast majority of investors should never, ever sell put options.
A highly reputable short seller comes out and declares the company is fraud and goes to TV and repeats the claim. Cramer comes to the show and essentially didn’t dispute the claim.
The CEO comes out with a lame tweet saying he is too busy working and don’t have time to respond to the allegations. Selling a put to pick “free money” is trying to pick pennies in front of a road roller that is moving at 60 MPH.
You are taking substantial risk Period.
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The fact that they issued their report means they are done selling and ready to buy…duh!
Saul, I have a very healthy respect for what you do. But the above statement is not a thoughtful statement. In fact, pretty naive.
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Err, Kingran, you think shorts issue their reports or news to drive down the price before they sell their position???
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Sure, UBNT runs some risk by doing business in so many different countries and they may even do business with some companies that wouldn’t be as “kempt” as the companies most of us think of. However, if those companies continue to pay UBNT for their goods, then all is fine.
The company hasn’t shown problems in assigning credit to their customers yet although I will say their DSO have increased. But that is because they are dealing with higher volume clients who have better credit and are demanding better terms. At these margins, UBNT doesn’t have any problems with cash flow.
This short attack is a complete farce. Note that I’m not saying it is illegal or shouldn’t be done. It is just a farce designed to make short term money. Good for them. I hold and will be buying a bit more unless the price rises quickly.
AJ
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you think shorts issue their reports or news to drive down the price before they sell their position???
Everyone has their objectives/ motives. The long articles that are published 1000 to 1 also with an objective to drive the share price higher. When was the last time anyone questioned WEB, that he is not disclosing his purchases beforehand? If you are willing to overlook the motives of someone going long and focus only on the motives of someone short, I think you are looking at it incorrectly.
What you should focus whether long or short is the point they are raising. Just because someone is long they are not a saint or someone short they are scamsters. Both are investors trying to make money.
As an extreme example, Saul here doesn’t tell before he buys, rather he posts his actions often after the fact. If you apply that logic Saul is the biggest fraud. We both know that is absurd and saul has nothing but honest intentions in sharing his thoughts, opinions.
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Saul here doesn’t tell before he buys, rather he posts his actions often after the fact. If you apply that logic Saul is the biggest fraud. We both know that is absurd and saul has nothing but honest intentions in sharing his thoughts, opinions.
Hi Kingran, I’ve made it very clear that the primary reason that I usually don’t disclose my positions until the end of the month, is that my primary responsibility is to myself and my family. This is a free board and I offer my thoughts to try to help people do well in the market. Sometimes (fairly often) I make mistakes. If you’re not happy with how I do things, or you think I have ulterior motives, you are free to ignore everything I write or recommend.
Best,
Saul
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And Kingran, as far as relevance to Citron, if I am dealing with a huge company (Nividia for example), I don’t worry about talking about a position while I’m getting in to it, because the few hundred people who may use this board won’t move that market up before I can buy the rest of my position, but if I’m taking a position in a small company (Teladoc for instance), I wait until I have my full position, or close to, because I certainly don’t want to drive my buying price higher.
Of course Citron did the same thing! They took their full short position before they broadcast to the whole world, not just to a few hundred people, that they were short a relatively small company where they knew their announcement would move the price down temporarily. If they were still selling why would they want to push their selling price lower? Why would they want to push the price down further unless they were ready to buy? If they were still selling they’d keep their mouths shut about what they were doing. It seems pretty straightforward and obvious to me.
Saul
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you think I have ulterior motives
NO I don’t. I thought I was very clear about it when I said… “We both know that is absurd and saul has nothing but honest intentions in sharing his thoughts, opinions”
you are free to ignore everything I write or recommend.
I don’t make my investments based on what is discussed on this board. Except for UBNT I don’t think I own anything else that is discussed in this board. And most certainly I don’t make my investments because you or anyone made a post. While you have a great success, power to you, your style is vastly different than mine. I like REIT’s, stable large-cap companies, and some special situations.
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If they were still selling they’d keep their mouths shut about what they were doing. It seems pretty straightforward and obvious to me.
Like I said in another post, everyone has their motives. I can only question an action, not the motives because I don’t know them.
Forgetting about a minute about potential profits Citron can make, look at their track record of decades of calling out companies with questionable accounting and various other frauds, look at the points they raise, do they have a merit?
While you may consider UBNT as a small company, a company with the $4B market cap is operating without a CFO, CTO or COO (I don’t think the current guy is worth the title). Is Robert performing his fiduciary responsibility? A serious allegation of “fraud” is made and the person who called has enough reputation to be invited by CNBC and Jim Cramer came on the show and didn’t aggressively push back, and the best CEO can come up with is, “clowns”? Try Immature, or irresponsible.
In fact, I broke my cardinal rule and opened a Twitter account and raised the question to Robert why UBNT is not able to attract a decent CFO or COO?
I am going to give another day or two for the board to put some pressure on the CEO to address this in a professional way. If not, I am gone.
Hubris is the worst enemy of the retail investor.
None of this means UBNT is a fraud but sometimes your actions speak louder than words.
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“Didn’t he also short NVDA a few months ago?”
andy
Andrew Left (Citron)shorted NVDA 2 times on valuation. The 1st time it dropped below $120 and the 2nd time it dropped below $140. Both times his short thesis was that it had run too far too fast. He said it was a very good company but valuation had become stretched.
Rob
Another red flag I almost forgot to mention is Ubiquiti’s high Beneish M-score:
https://www.gurufocus.com/term/mscore/NAS:UBNT/Beneish%2BM-S…
My last take on UBNT was that it is a train wreck waiting to happen. Much as I was intrigued with the new products/markets, I could not shake off the string of the counterfeit, the misguided new prodect and the bank fraud. I was concerned that they were entering a totally different distribution system in pursuing the retail customer overseas. I was imagining another quarterly performance by Pera in which he would say how the marketing (or whatever) guys had screwed it up and he was taking over and fixing that function.
I will again make the claim that I was the one who brought Ubiquiti to MF. While doing DD on Ruckus Wireless, I stumbled upon UBNT. Reading their discription of the business and notng the word “disruptive” about a gazillion times, and believing they did have a unique business model, I posted about UBNT on some board or another.
And, as I have previously posted, I was a fairly early user of Ubiquiti equipment. I still have a (now bare) 80 foot tower which graces the field on the other side of my front yard fence. The Ubiquiti equipment (first generation) is in a box somewhere. (Disclosure: I don’t know my access point from my base station so don’t beat me up too much). The accumulation of unreliabilities of DSL service to (?) access point, modem, cables, Ubiquiti transmitter/receiver, cables, and router kept me in far too frequent contact with an equally unreliable (and costly) tech guy. Therefore, I am communicating this via a pocket wi-fi, Ubiquiti itself having been disrupted by the expanded reach of a 4G service (albeit oversubscribed and soon to be near usless when school day is out thousands of third-world school kids take out their 2009 i-phones and play whatever-it-is).
The Ubiquity community exists. It exists (or did exist) mostly for guys like my techie, who was basically a wireless security camera installer. He is the one who knew about Ubiquiti. He could talk the talk and these guys helped each other. And sometimes argued, and sometimes bitched about the glitches and suggested fixes…. So, I asked questions and the community reached out to help me. It was not successful because this first gen stuff was not consumer grade and and I am not tech grade. But a fraud? Nonsense (previous word censored). IMO, the Ubiquiti community is real. Whether it is sustainable or beneficial to some new products is another issue.
Despite my investing and using experiences in UBNT/Ubiquiti and resulting doubts, I recently made a small investment. And, I added on the Citron drop. All this said, my take on the Citron piece is that it is 90% garbage. The accounting is a fraud? Who is being frauded? If I own a company and I am not leveraging debt and not paying dividends, …. what is my motive to cook the books? What do I gain, except an ego trip on how successful my company its? O.k., I need to buy out my Grizzlies partners. For that purpose I set up this disruptive business model 10 years ago? Farsighted business man that. O.k., go into this consumer level product so I can stuff the distribution channels, create all these fake sales and dump a couple of percent of my shares on the unsuspecting? I mean, c’mon, do you buy back shares of a company, the shares of which you have inflated by accounting fraud? Help me out here, guys ’n’ gals. I’m just typing out that which streams through my head.
Beneish M-score. I just say this. One ought not give weight to it unless familiar with its basis and the assumptions or conditions which are used , and whether those are valid with respect to the company being analyzed. Nice to have a -2.22 cutoff score that defines manipulation. And UBNT did have a -4 score in the past. But it would also be nice to know which of those 8 factors (if any) has most influence on the score and whether and how much the current business model impacts that. Does the current UBNT business model fall within the assumptions and conditions that underpin the Beneish M-score? How has the new product and larger distribution pipeline impacted the score? What has changed since the days of -4? Someone can explain that, I’m all ears. Otherwise it is tea leaves.
My 10% concern comes from the possibilitiy that Ubiquiti can screw up the distribution channel with the new products and larger distributors. I put zero weight on the fraud aspect. Arrogance and inexperience? You bet. Been there, seen that a couple of times with UBNT. And, who was it, Hain-Celestial that spent several quarters trying to untangle income recognition from distributors??? I bet they had several layers of CFO-types.
My intention, now four hours before the market opens, is to be a buyer. How much, how soon? don’t know. If Pera is not going to defend on his end then I should probably let the bears run the floor for awhile. I don’t NEED to buy, but I can be greedy and I do have deployable cash. Looks like a buying opportunity, but EBIX and BOFI say that it can be a long journey. I still haven’t filled up NVDA and SQ positions. And INST, NTNX…, add some TLND?
KC, just a little long UBNT (anyone need a slightly used nanostation or M bullet or PoE?)
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You are taking substantial risk Period.
Kingran,
Thanks for your concern. I am aware that I am taking a risk. How “substantial” it might be is a point upon which we disagree. Do you actually think UBNT will go the way of VRX? I don’t. But, of course it’s possible. This is the stock market, most investment advisors would say that people my age (or Saul’s) are taking a huge risk by having the bulk - OK, all - of our investments in stocks. I should probably be (according to sage counsel) 50% or more in treasuries, with the remainder in conservative mutual funds save for an annuity or two. As it is, I’m up 62% so far this year. I’m pretty comfortable with being in about 15 positions (three of which are tiny speculative positions, probably far riskier than the put options I just sold).
UBNT is not my favorite company and Pera is not my favorite CEO. I was in UBNT a while back and sold my position at a small profit. I’ve stayed out of it ever since. But, I’ve watched the way Citron operates. They don’t give two (starts with “s”, ends with “s”) about the validity of their claims. Their sole interest is in whether or not they can move a stock price down in order to exploit their shorts. That’s it, IMHO. Once they close their position, their gone, moving on to the next victim. That’s not to say they’re not correct occasionally, I’m just saying that being correct in their reports is not a major concern. Their major concern is having the appearance of a substantive basis for calling a short, not actually having one. FUD is a powerful tool, especially if you have a vehicle to spread it rapidly to a broad audience of those with skin in the game.
I’m not going to pick apart their narrative point by point, but take for example the Google Earth photo of the distributor they claim was operating out of a tent or whatever. First of all, I’m not sure why that’s a bad thing, but more to the point, about 10 years ago I completed an addition to my house. But, if I look at the Google photo of my house, it looks just like it did before I added on. So that photo is at least ten years out of date. Maybe the location in question had only a tent ten years (or likely more) ago. What’s it look like today? My point isn’t whether there’s a different structure in that location, my point is that if that’s part of your thesis, wouldn’t it be advisable to have current information? Unless of course your goal was strictly to cast shade.
I’m a big boy. I am well aware of the risk involved in trading options, that’s why I rarely do it. But, my track record is pretty good. I’ve made money on most of my option transactions, considerably more than I’ve lost. Pera is scheduled to provide an “investor update” on 9/26. It is my assumption that he will address the short attack at that time.
Anyway, just so you know, should the stock get put to me, which I kind of doubt, but if it does, of course I’ll use my new position to sell calls.
In summary, while I appreciate and understand your take on this, you and I have different risk tolerances. And, I don’t easily buy into the assertions of FUD peddlers.
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…but take for example the Google Earth photo of the distributor they claim was operating out of a tent or whatever.
The address for the photo of the tent is:
17 Generala Karola Kniaziewicza
Czestochowa, Silesian Voivodeship
The photo is marked “Image capture : Aug 2014”.
But the aerial photo, which also appears to show the tent, is marked “Imagery 2017”.
https://www.google.com/maps/place/Stanis%C5%82awa+Worcella+1…
Why would they want to push the price down further unless they were ready to buy?
Why did Pera give guidance for the first time ever, causing the 25% pop, then sell 1 million shares into that?
Why would he want to prop up the price further unless he was ready to sell into that strength [and screw the buyers]?
Fraud or no, that’s pretty shady behavior.
Everybody be careful out there.
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But, I’ve watched the way Citron operates. They don’t give two (starts with “s”, ends with “s”) about the validity of their claims. Their sole interest is in whether or not they can move a stock price down in order to exploit their shorts. That’s it, IMHO. Once they close their position, their gone, moving on to the next victim. That’s not to say they’re not correct occasionally, I’m just saying that being correct in their reports is not a major concern. Their major concern is having the appearance of a substantive basis for calling a short, not actually having one. FUD is a powerful tool,
With due respect, I disagree. Can you provide examples of where they made claims without facts or basis? IF you want to discredit, that is what you are doing, actually you are doing without providing any facts.
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Red Flag #5
So we are expected to believe that Ubiquiti generates nearly all its cash in Hong Kong and U.S. cash balances have not grown, despite the fact that most its expenses are offshore, it has been profitable every quarter since its IPO, and roughly one-third of its revenues are from the U.S. market. Where is the growth in U.S. cash?
Ubiquiti International is in Hong Kong. Here is what I believe to be true: One can have a business in Hong Kong that exports and there are no taxes on the profit from the exports. So if Ubiquiti manufactures in China, it could sell the product to the Hong Kong entity at very low margins, sell from Hong Kong to international companies at high margins (even back into China?). Sell to U.S. at higher price and the profits are in Hong Kong. And therefore, the cash is there.
The question would be, “How do you utilize the cash?”
KC
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Red Flag #5
So we are expected to believe that Ubiquiti generates nearly all its cash in Hong Kong and U.S. cash balances have not grown, despite the fact that most its expenses are offshore, it has been profitable every quarter since its IPO, and roughly one-third of its revenues are from the U.S. market. Where is the growth in U.S. cash?
Ubiquiti International is in Hong Kong. Here is what I believe to be true: One can have a business in Hong Kong that exports and there are no taxes on the profit from the exports. So if Ubiquiti manufactures in China, it could sell the product to the Hong Kong entity at very low margins, sell from Hong Kong to international companies at high margins (even back into China?). Sell to U.S. at higher price and the profits are in Hong Kong. And therefore, the cash is there.
The question would be, “How do you utilize the cash?”
KC
Could be. Another possible explanation. Cash in US is utilized for buybacks so US cash balances do not grow as compared to those outside US.
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Red Flag #4
Batna/Anteny is operating out of a tent.
PW Batna is a distributor and an internet service provider (with 4.7 of 5 star rating as ISP). They are distributor for Mikrotek, Totolink, Mimosa, RF Elements, Huawei, TP-Link and Extralink in addition to Ubiquiti. They are one of 22 master distributors for Ubiquiti in Europe. The listed sales outlet for Ubiquiti in that region of Poland is Alfaextranet Sp. a o. o. which is located a mile or two away from Batna (actually BATNA/Anteny24).
They are on Facebook at BATNA/anteny24.
Also at www.anteny24.pl The website lists products from more companies. They seem to have more pictures of girls than hardware, though.
TP-Link and Extralink are the major providers of routers and such in the Philippines and Huawei is a major player (my pocket wi-fi device is Huawei).
For whatever the above is worth,
KC
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