Endurance International Group – the Nasdaq-listed firm that was targeted yesterday by short seller Gotham City – has dismissed its claims as “baseless and not rooted in reality”.
Yesterday the shadowy analyst firm identified EIGI as a company “that gets us as excited as Quindell and Gowex did”, putting a zero-dollar price target on its share price.
Investors reacted quickly: the share price fell off a cliff, dropping more than 26 per cent at one point, although it ended the day down a somewhat less alarming 10.2 per cent.
Gotham City had made a series of claims to back up the view that between 40 per cent and 100 per cent of its profits were “suspect”, including that its organic growth was overstated by three-times, that profits were “at the expense of its customers” and that it had a “history of terrorist and spam/malware subs.
But EIGI has hit back.
“The reality is, since going public Endurance has beat expectations every quarter, showing consistent growth throughout the company,” a spokeswoman said. “Endurance senior executives still own a significant stake in the company and are deeply invested in its future success. To suggest otherwise, is ridiculous.”
She added: ““Endurance is transparent in how it calculates all of its metrics including its average revenue per subscriber, subscriber counts, organic growth and monthly revenue retention. The company has always been clear in its financial disclosures and reports on its financial health and growth.”
KPMG acts as Endurance’s internal auditor while BDO is the company’s external auditor.
“As previously disclosed, the company’s free cash flow for operations in 2014 was $143 million. Additionally, Warburg Pincus and Goldman Sachs own more than 40 percent of the company. Endurance has never interacted with Gotham City Research or the unnamed analyst who authored this report,” the spokeswoman said.
However, Gotham City is not taking the response lying down. It has responded saying it will reveal further information to support its claims today.
$EIGI : "The claims in this 'report' are baseless & not rooted in reality" - Gowex said similar. We are preparing a memo for release tmrw.— Gotham City Research (@GothamResearch) April 28, 2015