UBNT article going over Left's claims

Nice to see UBNT recovering even while the Nasdaq is down around 1% today.

I just read a good article going over Left’s UBNT claims. The author, Grant Beaty, is a regular on Seeking Alpha in regards to UBNT and reading his comments is very worthwhile as he does a lot of research and is pretty knowledgeable about the company (https://seekingalpha.com/author/grant-beaty/comments).

He issued a long article that goes over Andrew Left’s claims in detail. See here: https://seekingalpha.com/article/4109287-review-andrew-lefts…


Imagine you’re a 30-something entrepreneur who has bootstrapped your own business. By enabling low-cost deployments you’ve basically created the WISP industry as it exists today. You have at least enough cash flow to support rapid revenue growth and enter new markets, all without capital raises. You’ve hardly sold any shares, and still maintain 70% ownership of your company. If you cashed out now you’d be set for life and then some.

Why would you commit accounting fraud? Stranger things have happened, but its not something I’d bet on. If Left is right, Robert Pera, Mark Spragg of FTI consulting, Kevin Radigan and Craig Foster would all be criminally liable for the fraud.

While Ubiquiti has made plenty of mistakes, these are more easily explained by poor internal controls than deliberate fraud. These controls are necessary to handle the agency problems inherent in your average public company, but are much less necessary for Ubuiqiti with Pera’s 70% ownership.

I would like to hear the low interest earned on cash explained in the upcoming investor webcast.


You can listen to the UBNT Investor Day presentation live tomorrow (9/26 @12:30 pm) here:



I read the article, too. The latest reactions have been favorable to UBNT and going into more detail. I don’t know if Left was just sloppy or mostly venal, but I’m now leaning toward buying more shares, assuming I don’t find something even better to buy.

Saul, you kept all your shares?

I’m now leaning toward buying more shares, assuming I don’t find something even better to buy.

Be sure to take note of the 12:30 eastern time investor call tomorrow…could have an impact on the share price.

Saul, you kept all your shares?

I added a small amount, but didn’t get the bottom price. I was chicken at the time, but the more I thought about it, the more I thought that this is a winning situation, especially after he raised guidance, and announced another buy-back last week.



I was chicken at the time

Wow, never heard that before from you, Saul! :wink:

I bought a bunch more around $52 after the buy-back was announced. But UBNT wasn’t a large position for me yet, now it’s about a medium position.

Nice to see it keep heading up, hopefully this ends up being nothing more than a 1-2 week blip on the chart.

Be sure to take note of the 12:30 eastern time investor call tomorrow…could have an impact on the share price

today’s webcast available here:

latest news seems to have put a small dent in the share price today

I am interested to see how the share price reacts after the call is actually over.

Some thoughts:

Pera seems genuine. IMO there’s zero fraud going on.

He’s smart, and while he understands the business concepts, he’s not a polished CEO.

Don’t think he wanted to sell his 1M shares but “had no choice” given his Memphis Grizzlies deal.

Doesn’t care what analysts think and doesn’t care window dressing; he cares about the long term position of UBNT.

He is very knowledgable about the technology and the market.

Seems to have very good business instincts even if he doesn’t articulate them as a polished CEO.



I watched the first 2 hours of the presentation and agree with Chris’s take. Pera is not a polished CEO and I am glad he does not spend his time on CNBC promoting the stock and arguing with Citron.

He’s a product guy and has learned a lot in the last few years related to running a company. When UBNT went public, the private equity company largely set up a lot of the Board and he was not focused on legal and accounting issues. Over time, he replaced the Board with long-term minded members and brought in FTI to overhaul the accounting team. The company has a CAO, which they need. They don’t need a CFO, who normally are finance guys and don’t usually get into the detailed accounting reviews. CFOs focus on wall street, M&A, financing, etc, which is not a priority for UBNT. They need a CAO that oversees a team of accountants that have well controlled financial processes. I posted about my relying on KPMG’s clean opinion of the recent audit for the year ended June 30, 2017. KPMG has trained auditors that spent over 10,000 hours with full access to all company records and personnel. If there was material fraud, then they would have raised material weaknesses.

I like Pera’s reference to Henry Singleton of Teledyne from the book Outsiders who bought back 75% of the company’s stock over time whenever the valuation became cheap. Pera’s focus is increasing EPS over the long term. Obviously increasing earnings is one way, but reducing share count is another way to do it. Most companies dilute their shares, so I love to see companies buy back stock where it does not only offset stock options issued to management and the Board. Pera does not pay himself any salary and has granted himself zero equity since they went public. That is rare. Tom Gardener says he looks for founder led companies because they act like long-term owners. Pera is this way and is not trying to manage earnings to meet analysts’ quarterly expectations or meet bonus thresholds. I’ll take a CEO like Pera over a polished CEO that focuses more on pleasing analysts than pleasing long term investors.


For those that did not watch the webcast, you can still watch it here: http://ir.ubnt.com/events.cfm

Here are some of my notes:

Employees – It’s an R&D culture. Hires the best engineers and lets them do the product development with minimal oversight. He’s willing to pay for top talent and entrusts top performers to own the product development. Believes in small teams that operate independently. Uses tools like slack to communicate to work together. He now understands that you can’t run accounting and legal the same way and they need to focus on good controls.

Enterprise – Pera understands that big companies don’t want free support via the forums which WISPS currently utilize for support. Companies believe that if you are not paying for service, then the vendor is not obliged to provide timely support. This is something that will be improved and should help Enterprise growth.

Marketing – So far there has been very limited spend on Marketing but he understands that this needs to be an area of more focus to improve growth.

Consumer – AmpliFi has good momentum. Will introduce a couple more products this year but not quite meeting Pera’s expectations. Number of products for Ubitquiti Labs should triple in the next 12 months. It’s profitable. Believes FrontRow shows the quality of the R&D talent, but mentioned that maybe “it’s not the one” meaning it may not be selling that well. Believes there’s a lot of opportunity in consumer.

UniFi – Everyone who tries it loves it, so need to open it up to more potential customers. Leaving a lot on the table, so it is a big focus for Pera. Brand is very strong. A lot of potential in video that will be a growth driver. Believes there is a lot of work to do to get to the next level, but just scratching the surface.

FY18 revenue guidance – Feels comfortable meeting the minimum $1B guidance with no revenue contribution from new products. To hit high end of 1.15B, they will need some help from 2nd generation GPON, 4th generation of video, AirMax, LTU, etc.

Inventory – It was Pera’s mandate to increase inventory levels to meet demand. Expects inventory levels to come down over time.

Margins – Doesn’t differentiate between cost of sales, operating expenses, etc. Focused on maximizing bottom line EPS. Has not focused on improving supply chain and vendor bidding, so could see cost improvement in margins as they start doing this.

Community – users and activity is increasing. Quality of content is improving and valuable to new customers.

Selling stock – Painful to sell the stock, but needed to do it to protect himself in his personal venture (see Grizzlies) so he does not get taken advantage of.

Quality – Have not always focused on quality and full testing before release. This is improving and most of this goes through the beta store now with WISPs that want to test beta products and provide feedback.

LTU – will be great, good response from the Beta store. Called it a Rolls Royce that will target a higher end market.

Citron report – No sense in arguing with someone that says “the sky is red”. The overseas cash was collateral for US cash borrowings to buy back shares – this could explain the lower rate of return on cash.


The overseas cash was collateral for US cash borrowings to buy back shares – this could explain the lower rate of return on cash.

This does not explain the very low rate of return on overseas cash. You can own 1-month USTs, the most liquid T-bill in the world, and get paid 0.99%. They are bought everywhere in the world in large size from China to the Caribbean to Paris to Japan.

This one is a real head-scratcher.

Just to add to your point, collateral earns interest in a different jurisdiction and the loan is in different jurisdictions and pays interest based on local market rates.

Did anyone else read this article over on Seeking Alpha?


Am I reading it right that the author is basically implying that Kaplan (one of the Grizzlies minority owners with a lower percentage of ownership than Pera) may have been somehow involved in getting Andrew Left/Citron involved in their calls of fraud?

hahaha Like I said everyone has their motives. What we investor should really care about is, are there any merit in the argument?

Ubiquiti announced yesterday that they are releasing quarterly earnings on 11/9. This paragraph from the release appears to have been influenced partially by Citron’s “report”, unless a similar paragraph has been included in prior releases.

Ubiquiti Networks, Inc. currently focuses on 3 main technologies: high-capacity distributed Internet access, unified information technology, and next-gen consumer electronics for home and personal use. The majority of the company’s resources consist of entrepreneurial and de-centralized R&D teams. Ubiquiti does not employ a traditional direct salesforce, but instead drives brand awareness largely through the company’s user community where customers can interface directly with R&D, marketing, and support. With over 70 million devices shipped in over 200 countries and territories in the world, Ubiquiti aims to connect everyone to everything, everywhere. Ubiquiti was founded by former Apple Engineer Robert Pera in 2005. More insight about the company management can be found at www.rjpblog.com.