Waking Up to an EBIX Nightmare -- and Acting Fast

I woke up on Thursday to find the futures way down following a relatively good initial reaction to the Fed's three-quarter percentage point interest rate hike the day before. Then, the news below came over the wires sending EBIX , one of my holdings down 36%. Pre-market. The fall was on a short report released from Hindenburg Research. EBIX reported a decent first quarter and has been teasing investors with its imminent spin-off of EbixCash, which is projected to bring the parent company well over a billion dollars U.S. when it comes public. Hindenburg Research is a short-selling outfit that often targets stocks. After the prices are driven down, firms like Hindenburg can make money when they cover their positions. Having a vested interest in creating doubt about stocks already sold short doesn't mean the firm can't be right in its analysis. It does suggest it has a reason to savage shares for its own benefit. Hindenburg waited for a huge down morning, which induced fear already, to publish the highly negative info on EBIX. Watching one of your stocks get slammed nearly 40% is gut-wrenching. It is especially hard to deal with considering a pending spinoff, which would solve all the financial problems Hindenburg was referring to. This was my take on EBIX as of Oct. 5, 2021. How can you know what to do in a situation like this? The real answer is... you can't. If things play out well EBIX, could turn into a huge winner. On the other hand if the dire forecast comes true, there might be far greater downside, even from today's price. Everybody that held EBIX on Thursday morning needed to choose from the following options: Sit tight and see what happens Sell at a much lower price than the previous 52-week low Buy more, hoping the bad news is a rumor, not a fact Deciding which way to go is a personal choice. I had lots of covered call options due to expire on Friday. In non-margin accounts, or those without the ability to go naked, the stock could not be sold without buying to close (BTC) those calls due to expire just a day later. After watching EBIX dip violently to below $14 and then rally back to around $17.50, I made my decision. I bought to close the calls, preventing me from selling and dumped my EBIX to prevent further damage. I might very well live to regret that decision. That said, the current beaten up market had put tremendous other bargains in front of me, which offered huge upside without the uncertainty of EBIX. I dumped all my EBIX shares across all my accounts. The profits on my covered calls helped, but did not nearly offset the extent of the losses. I'll thus have some tax advantages from selling in non-sheltered accounts. I also got immediate access to a substantial sum of money which I could reinvest. Adding to American Woodmark , Berry , Cracker Barrel , Jack in the Box , G-III Apparel Group and Acco Brands , with all at new 52-lows, softened the blows to my account values and my ego. Every one of these replacement stocks has a high probability of gaining from 50% to 150% within 12- 24 months. I can't fault anybody who chose to hang in there with EBIX. They might end up with the last laugh if the EbixCash spin-off gets done soon, at near its expected valuation. If so, Hindenburg's theory of a financial squeeze on the parent company goes out the window. Apologies to readers who bought EBIX on my recommendation. I have suffered alongside you. A further mea culpa is in order as my call of a May 21, 2022 market bottom has been blown out to the water already. I'm still very, very bullish on the remainder of 2022 and beyond but my timing proved premature. 2022

Waking Up to an EBIX Nightmare -- and Acting Fast

Here's what happened when I saw the Hindenburg report on one of my holdings.

Columnist Conversation

This Weekend on Real Money

Very Good Quarterly Numbers From Bassett Furniture (BSET)

First-Half Results - Putrid; Second Half Results - Likely to Be Much Better

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.