Here’s a possible hypothesis of what’s going on with BOFI. You can decide if it’s even probable.
Facts we know:
2 internal auditors (out of about 40) left the company, at about the time of a SEC or some such periodic investigation by a large team of external auditors.
The external auditors interviewed the leaving auditors at length. One of them made claims of wrongdoing.
The external auditors decided there was no basis in fact.
The H&R Block merger was subsequently approved
Stock, which had been forced down to $106 or so, was making new highs in the $140’s, in just a few weeks.
Hypothesis of other events:
Internal auditor who made claims was unhappy in his job, fought with supervisors, maybe had personality problems, etc. Decided to quit.
Five or six of the ambulance-chasing firms who always sue companies who have disappointing earnings contacted him and said they’d represent him to sue the company.
They said that it doesn’t matter if your claims weren’t upheld, you were a whistleblower and we can say you were forced out instead of quit. We can sue on whistleblower grounds. We’ll represent you for free and just take 40% of whatever you win. If we make enough noise, maybe they’ll settle.
Conclusion
There is absolutely no new news. This was entirely something that could have been anticipated. Stock may be making new highs again in another month or so.
JMHO
Didn’t most of us learn about spreadsheets in school or use them daily at work? They are editable, data is easily deleted, or omitted. Maybe someone just had a cut-and-paste error or just didn’t want to share sensitive data with this guy.
A spreadsheet is not a password protected database with data-entry tracking and multiple backups. I’d like to see them find the “spreadsheet” and compare it to the actual data obtained for these entries. Unfortunately it wont stop folks from hitting the sell button in a panic…
I added shares today. It is public knowledge that this ex-employee complained to the Office of the Comptroller of the Currency prior to their approval of the transaction with H & R Block. It is ludicrous to believe that the regulator did not investigate this.
IMO this could blow over very quickly following the next earnings conference call and analyst reports.
Five or six of the ambulance-chasing firms who always sue companies who have disappointing earnings contacted him and said they’d represent him to sue the company.
They said that it doesn’t matter if your claims weren’t upheld, you were a whistleblower and we can say you were forced out instead of quit. We can sue on whistleblower grounds. We’ll represent you for free and just take 40% of whatever you win. If we make enough noise, maybe they’ll settle.
Maybe. Maybe not. For us more information is better. It would be useful to find out if the plaintiff’s law firm has a previous history of baseless lawsuits.
From a business standpoint, BOFI may well want to pay to resolve a baseless claim. Very few business fight a lawsuit on principal alone. Litigation costs, reputation, and the value of the company all have gone down because of these allegations. Settle it quickly and everything is on its way back to normal.
I bought more BOFI this morning.
If this was a Chinese company, I would be dumping stock faster than I scrapped the dirty condom off of my shoe the time I stepped on one in a parking lot. <Yuk!>
This has nearly 100% chance of being complete BS. This is the US. I don’t see BOFI management flirting with jail time. I bought this morning.
NEW YORK, Oct. 14, 2015 /PRNewswire/ – Faruqi & Faruqi, LLP, a leading national securities firm headquartered in New York City, is investigating the Board of Directors of PMC-Sierra Inc. (“PMC” or the “Company”) (NasdaqGS:PMCS) for potential breaches of fiduciary duties in connection with the sale of the Company to Skyworks Solutions, Inc. for approximately $2 billion in a cash transaction.
PMC had had stable revenue for years, and they were offered 37% over the market price, and these guys are going to sue them???
One thing to note is such an unsubstantiated claim can take the price down 30% on BOFI. something to think about when you put a large % of your portfolio to small companies such as BOFI
My question is: is anyone picking up more shares at this time?
It feels a little like rolling the dice, but I already had BOFI on my watchlist and looking for an entry point. Today, I picked up a small position at what may be later judged as an opportunistic entry point. Or not.
I think that Neil’s post was so pertinent that it should be reposted on this thread too. Here it is:
I’m not sure if someone has actually posted the exactly quote from the CEO, so here it is from the NYT article:
In an interview on Tuesday, Gregory Garrabrants, Bank of Internet’s chief executive, said the allegations were groundless. “The factual inaccuracies here are numerous and substantial,” he said. “Mr. Erhart [the ex-auditor] has made all of these allegations in great detail to federal regulators, who have reviewed them in depth and have found them to be wholly without merit.”
the attraction of nice even round numbers in stock markets is typified here by the bounce off 100. So I entered a buy order at 100.5 and it was filled. At a tiny bit lower price.
This “100 attraction” may or more likely may not hold.
Is this a real issue or just some lawyer based extortion?
Who knows. I am always suspicious of complaints filed by ex employees. Human beings don’t like to admit they were fired because they weren’t up to the job.
In the US in practice there is no penalty for nuisance litigation. If you sue me and you lose, I am still out time trouble and lawyers fees. The US is way overlawyered
BofI CEO Gregory Garrabrants did not respond to requests for comment for this article. He told the New York Times that “factual inaccuracies” in the suit “are numerous and substantial,” and that federal regulators have found Erhart’s allegations “wholly without merit.”…
Strong words.
And from same article
Even so, there have been plenty of signs that the company was headed for a fall. As reported in the New York Times in August, as well as on various financial websites, a rising number of short sellers has bet against BofI over the last year amid concerns about its loan portfolio and reporting standards.
Well, hopefully this will satisfy a lot of short sellers and they will take their profits.
Bargain hunting: With the strong denials out today, there is not much else to be said by the company, that is probably not a high probability of upside surprise for a while (other than earnings). There is not a need to be greedy or over wieght at this point, “good low” prices should be around for a while. Maybe at least wait to see if it can stay above the 200 dma.
Disclosure: I bought my first nibble at about $107 today and another small one around $100 near the close. Now I will wait. If it is destine to go back to $140, I can be happy waiting for $110 or $115…or $75
I added a little around $101 and change. I was too aggressive adding to SWKS on the way down, never imagining it’d drop into the $70’s (it still boggles my mind, really). I’m going to be a bit more patient with BOFI. If there’s one thing the market proves regularly, it’s that there’s nothing rational about what it does or what prices it may offer.
If it spikes back up, that’s fine with me: it’s already a large position.
