My comments on UBNT

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I often make mistakes, and when I do I always try to admit them and let you know, but this time I hit it right on every point. Here’s what I wrote last Monday:

“Here’s my naïve take: We were all wondering how Ubiquiti could have lost the entire 25% they gained on their extraordinary results and guidance. Well, evidently Citron and friends have been selling short and pushing the price down. They have fully established their short. But now they have a problem: How can they close out their position without the price rising too fast? They come out with this short report, which scares out a good number of longs and lures in a bunch of retail shorts. There’s enormous volume of people selling, and Citron buys every share they can get at under yesterday’s close. Then the price returns to normal after a week or so, and Citron is long gone, off to attack some other company.?..

And look, Citron didn’t wait until after their “report” to take their short position…??The fact that they issued their report means they are done selling and ready to buy…duh! (If not they’d be awfully stupid.)”

I then commented that Citron can put this in their books as another successful short (for them!), even if the effect only lasts for a week.

But think of the cynicism! By the end of the week the price had returned to where it had been at the previous weeks close (as I predicted), but in the meantime they sucked in all those poor retail shorts who follow them, and who got killed selling at the bottom, so Citron could buy near the bottom, and close out its shorts. They also scared some innocent longs into abandoning their shares at the bottom too.

I hope that my comments on Monday helped some of you keep from selling out of your shares at or near the bottom.

Saul

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Hi, Saul,

I love your comments. Inspired by them, I started a stock position of UBNT for myself, and an options position for my company. Now I am waiting for the investor day (Sep. 26, 2017) with great excitement:)

Alex

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After reading this board and mulling over all the comments I added to my position.
Thanks Saul and everyone who weighed in with your thoughts.
Mike

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But think of the cynicism!

I think the cynicism is selective. The company issues a great guidance and then the CEO sells his shares and no questions on that? How come?

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I think the cynicism is selective. The company issues a great guidance and then the CEO sells his shares and no questions on that? How come?

The CEO owns close to 70% of the stock. So for 100 million dollars of buyback, he is putting his own 70 million dollars on the line.

Unlike other technology firms - almost all technology companies - there is no obscene stock based compensation, the CEO does not take a hefty salary. We have a CEO who does not go out of the way to woo wall street and in fact has chided them for their short term focus on a number of occasions. Most companies give forward looking guidance and do much more to woo the investor community.Inspired by Andrew Left I am surprised none of these were cited as red flags by Citron :-). How the hell can a technology company in this day and age have no stock based compensation, same non gaap and gaap eps ? Red Flag !! :slight_smile:

CEO has to make some money somewhere for his life and other activities. If he offloads a puny 1% stake it is no big deal. On the whole as an investor I am actually happy Pera is showing adaptability in his approach and is taking some basic steps to woo the investor community.

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The company issues a great guidance and then the CEO sells his shares

Kingran, The CEO didn’t “sell his shares”. He sold 1% of his shares! And he gave great guidance because the company is doing well, and they will make the guidance. In fact, far from having given fake high guidance originally, they just raised guidance again this week, so actually the original guidance was conservative.

Just curious… why do you hate this company so much?

Saul

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He sold 1% of his shares!

It makes sense for someone like Pera to diversify his holdings at least a little bit! Even if you feel very sure of the company you own, you shouldn’t keep all your eggs in one basket.

George

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Just curious… why do you hate this company so much?

Hate is a strong word. Raising questions is not hate. What comments made you think, I hate this company?

BTW, I have expressed my concerns, reservations about not having CFO, margins, etc, long before the current short episode. I haven’t seen you question my motive then, but you do now.

On the other hand, you questioned Left’s character and when somone pointed much more sever issue with Bert you brushed it off. Are you being objective?

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why do you hate this company so much?

Sorry, Kingran, I shouldn’t have said that. It was a personal remark about motives when I should have been sticking to investing. I really do apologize.

Saul

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[quote]Hate is a strong word. Raising questions is not hate. What comments made you think, I hate this company?

BTW, I have expressed my concerns, reservations about not having CFO, margins, etc, long before the current short episode. I haven’t seen you question my motive then, but you do now.

On the other hand, you questioned Left’s character and when somone pointed much more sever issue with Bert you brushed it off. Are you being objective?[/quote]

Couple quick things. If he honestly just wanted money, why not declare a special dividend instead of selling 1% of his holding? Either option would have given him the money he needed, and since he is such a large shareholder, either method would have been viewed with suspicion after raising guidance.

Bert acknowledges his past in his bio, there for everyone to see. Left does reveal his past, but it takes a lot more digging to find it. Personally, I don’t like Left at all, never have. Pretty sure I have a couple posts about him on the boards here. When a very wealthy short-seller can use the media as his mouthpiece to drive a stock significantly lower so he can profit far more when he covers, it’s not right. I haven’t seen much for hardball questions at all thrown at him. Even if his arguments have no merit, he’ll still gain credibility because it moved the stock price due to longs bailing, retail shorts, and stop losses triggered.

As far as a CFO, do they need one? Do they need a massive sales team? If it’s not broken, don’t fix it. If they’re doing fine now, the more individuals they add, the lower their margins get and share dillution would definitely increase with adding executive officers. Ultimately it comes down to a cost/benefit analysis. Sure, the right sales people in the right place at the right time can definitely drive sales much further, but is it needed? There’s some hardware companies without massive sales departments, the ones that I have the most experience with are defense contractors.

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either method would have been viewed with suspicion after raising guidance.

I have actually suggested Pera’s high stake means institutional investors will not be comfortable investing in this stock, it will benefit the stock price if Pera can meaningfully reduce the shares.

I didn’t raise the questions when he sold, but raising the guidance and then selling is not getting the same negative views like someone establishing a short position and then sharing their views in public, that is what I was trying to point.

Actually, I have not noticed Bert’s past until Ears pointed out. In any case, it didn’t alter my views because I have not made any actual investment decision based on that. And irrespective of his past, I will continue to view his opinions as in the past. To me, it is just another data point and his views are not that bad either. My point again is, you cannot have one set of values for something you like and different for something you don’t like.

I have my views about why they need a CFO. Clearly, the company needs an experienced COO. They are not able to handle supply chain issues, manage inventory, etc. I would also like to see a bigger board with a more diverse background. While Pera may be worried about paying for all those things and can view them as an unnecessary expense without commensurate benefit, but for an individual investor that only reinforces the view that this company will be run for the sole benefit of Pera and any benefits to the rest of the shareholder base is happenstance.

While there are many who will find that being in this along with Pera is an optimal situation, I am not comfortable with that.

Once the noise settles and stock price stabilizes I will be selling and move on. For less than 1% position I am spending too much cycles on this.

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No worries Saul.

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I think the cynicism is selective. The company issues a great guidance and then the CEO sells his shares and no questions on that? How come?

Kingran, based on several articles about Pera’s sports ownership endeavors (he’s managing owner of the Memphis Grizzlies), I think his sale of shares is related to an upcoming October date at which he can buy out some of the other owners of the Grizzlies. I haven’t confirmed this for sure, but the timing seems far from coincidental.

So, my belief is that the raising of the guidance and timing of the sale of the 1.2-ish million shares were completely unrelated, but that the upcoming deadline to increase his stake in the Grizzlies and his sale of the 1.2-ish million shares are VERY MUCH related.

Some reading:
https://www.theringer.com/nba/2017/9/7/16269342/memphis-griz…
http://www.commercialappeal.com/story/sports/columnists/geof…
http://www.commercialappeal.com/story/news/2017/09/19/grizzl…

After reading that middle article (the first Commercial Appeal link), I am that much more sure that the Grizzlies ownership situation is the reason for Pera selling shares recently. He likely didn’t need to obtain the full amount of cash for buying out Kaplan and Strauss, but probably did need some cash money to pair with loans he could take out using his remaining 58-ish million UBNT shares as more-than-adequate collateral.

Hers’s the portion from the article:
“When Robert Pera bought the team from Mike Heisley in October of 2012, he agreed to a buy-sell arrangement with two minority owners, Steve Kaplan and Daniel Straus, under which either of those minority owners could submit a bid to buy out Pera’s interest. Pera would then have to either accept the bid and sell the team, or buy out the minority owners’s interest at the bid price. So, for example, Kaplan could offer to buy the Grizzlies at the price of $1 billion, and Pera would either have to sell his 25-percent share of the team for 25 percent of $1 billion, or he’d have to buy out Kaplan’s 14-percent share of the team for 14 percent of $1 billion.”

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During the investor update, Robert just confirmed my suspicions without specifically mentioning that it is the Grizzlies ownership situation that prompted his stock sale.

A few things he did actually say: It kills him to sell stock, and he wishes he never had to sell stock. He did it to put himself into a better position to ensure he isn’t taken advantage of in a situation with “another venture” that he is involved in.

That other venture is absolutely the Grizzlies ownership situation.

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