Eros Share Discussion Threads

[smurfy2001] 10/12/2015 22:13

Institutional Ownership 71.03%

[michael156] 10/12/2015 21:53

Even some of the staunch "Anti's" are changing their spots slowly to standing on the fence - Interesting read....



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You Just Can't Own Eros Here

Dec. 9, 2015 3:07 PM ET | 4 comments | About: Eros International Plc (EROS)



Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)


Summary


•Controversy over EROS includes questions about its accounting, cash flow and film library.

•Numerous larger investors have recently increased stakes in the company.

•The information provided by both bulls and bears leads us to inconclusive results; while we don't see reward shorting here, we think EROS must be avoided for the time being.



By Parke Shall with Thom Lachenmann

I always bring Thom in with me when I'm looking at a company that's being questioned by short sellers. He can provide the balance I need to make sure that I'm seeing both sides objectively. Eros International (NYSE:EROS) is a case where we've talked about the company for weeks now amongst ourselves, initially concluding it's an outright fraud, but now pulling back our conclusions to a point where it's going to depend on the company's coming results.

The controversy over EROS over the last few months has caused shares to decline almost 66% to levels where they now sit, around $10 per share. For weeks, short sellers, led by Seeking Alpha's own Alpha Exposure, have been alleging that EROS is hiding something from shareholders, noting the company's ballooning accounts receivable, lack of cash flow, and inconsistent labeling of its films.

To read Alpha Exposure's full analysis, you can click here and scroll through their articles.

We have read all of the critical reports as well as the commentary on Twitter and other social networking financial sites. We've also read all of the company's responses and the corresponding financial statements that have been called into question.

The reason that we are commenting on EROS is that a number of institutional investors have raised their stakes in the company over the last week, prompting us to once again look at the story. We want to look at all of the items in question and try and draw a reasonable conclusion one way or the other. What we have discovered is that we do not believe there is a trade or an investment here at this point, long or short, and that we think investors may be better served waiting for more information to come out before getting involved with EROS.

One large allegation made against the company was that its full list of films was incomplete and that some films were missing, potentially causing a spot for the company to inflate its revenue or obfuscate its operations from the public. After this controversy, the company provided a list of its films on its website and early accusations were later modified and revised to move from a "large number of films missing" to "smaller number of films missing." For the most part, we consider the film list allegation to have been at least partially debunked, as many of the smaller films in question continue to seem like they have no material effect on the business.

It was also alleged that some movies were released well before EROS had claimed they had been. The company's explanation for the listing of its films and the corresponding years not matching up was that some movies were released before they were distributed by EROS. This seems to be a reasonable response. Whether it's true or not still remains to be seen.

Naturally, accounts receivable is an area under scrutiny because it becomes a spot where the company could potentially hide revenue that it has booked but has not collected. Furthermore, the DSO number has been called into question numerous times as well. At best, this shows a company where the quality of earnings is poor, and at worst, allegations may be correct or partially correct that these revenues may never be collected on at all. We are interested in seeing a few more quarters worth of data before we make up our mind. The company has made some promises for the next two quarters, and we want to see how those pan out.

The interesting thing about larger investors raising their stakes in the company is that these investors have no doubt been subject to some of the criticism that the company has seen over the past few months. There have been numerous articles written, not just on blog websites, but also from reputable news sources like Bloomberg, questioning the company's integrity and noting that other investors have shied away from EROS due to the opacity of the company's financials.

The company also made some very strong statements at a conference several weeks ago, stating that it expects to be free cash flow positive by the end of the year and that it also expects to reduce the days sales outstanding and collect on some of the company's receivables. We're anxiously awaiting to see if this happens. If it doesn't in the next 2 quarters, EROS could be in real trouble.

Another area that we haven't been satisfied with yet is the company's auditor. It's been argued by the short side that the company's auditor hasn't touched the financials since 2012 and has only audited subsidiaries of the company. We are looking for bona fide proof that Grant Thornton India has audited all of the financial statements. Until we see this, we're going to continue to leave this question up in the air, unanswered.

Long or short, we just do not feel as if there is enough risk or reward in either direction with the stock trading at about $10. We are not convinced that the company is an outright slam dunk fraud, nor are we convinced that the company is operating legitimately. The ballooning accounts receivable is a big concern, as is the company missing estimates now that increased scrutiny has been placed upon it. We are watching the story closely and we plan on updating our thesis as more facts come to light. For now, until more facts come out, we think you can't own EROS.

[gk2000] 10/12/2015 21:35

The shorts must be feeling the squeeze, the volume was low today.

[foot in mouth] 10/12/2015 21:14

Nice 10% rise today. Maybe there is a leak that the independent audit showed nothing dubious?

[speedsgh] 02/12/2015 13:02

Dalton Investments In For The Eros Long Haul -

[michael156] 25/11/2015 20:18

Thank you foot in mouth, makes for good positive reading.

[smurfy2001] 20/11/2015 12:06

The institutional ownership increasing tells me something fishy is going on here.

[eurofox] 20/11/2015 08:28

they pulled it because of errors and because it took out the comments pointing out their hopeless accounting with it.

[lonrho] 20/11/2015 07:47

Last seeking alpha article from yesterday seems to have disappeared from website. First article raised some valid points but by the time the fourth came out it seemed to reek of desperation to try to keep their shorts in profit.

[hpcg] 20/11/2015 04:29

Temasek has a pretty poor investment record from what I've seen. The share price is clearly going to bounce around and I suspect I'll get the chance to go short again as those positions will get reduced and borrow will become available again. I suspect this saga will go on for a while yet.

[foot in mouth] 19/11/2015 20:43

EROS up 20% as I write. Nice to see some shorts getting burned!

I also have not sold.............hoping for a steady recovery. Wishful thinking perhaps??

[michael156] 19/11/2015 18:45

Ps...Still holding- Lock, stock and two smoking barrels !!

[michael156] 19/11/2015 18:43

I wonder if the very same people have done similar to other companies but those very companies have risen above it all and are now riding high ? I guess that's a " How longs a bit of string " question because they are constantly changing their alias's over time ? It's all very interesting but must say that I wish it were all about investment and not manipulation of the share prices which seems to be prevalent in this day and age.

[gk2000] 19/11/2015 18:38

The share price is up today, I think the shorts must be considering the AE will not deliver 0 share price in the short term, I guess it's expensive to run a short for a long time.

[soul limbo] 19/11/2015 18:21

smurfy.. the same people also wrote letters to SEC regarding 3 or 4 other companies.... the results were not very good (for the companies concerned)

[blusteradjuster] 19/11/2015 16:17

The whole was valued at $800m based on a suggested 10% going for $80m.

[smurfy2001] 19/11/2015 16:16

Soul Limbo, who wrote that letter to the SEC? Same person writing the articles on Seeking Alpha?

[smurfy2001] 19/11/2015 16:14

$800m BTW.


lonrho 18 Nov'15 - 22:38 - 929 of 937 0 0

The problem with worthless programme rights is that netflix , the murdoch empire and others are looking to launch in India. Their issue is that indians like indian content and they haven't got any. There are recent articles in the FT where companies are supposedly negotiating to buy 10 percent of Eros Now for $80 million and it hasn't even properly launched yet at least in subscription form.

[lonrho] 19/11/2015 15:10

The seeking alpha author has obviously no knowledge of how consolidated accounts are prepared and in particular the elimination of inter company receivables and payables and how this affects the ultimate USA quoted company and the sub consolidation of the Indian quoted group.

[eurofox] 19/11/2015 14:12

If you sign up and look at the 19 comments on this latest missive, you will see that the shorters are themselves taken to task on hopeless accounting analysis and have themselves been reported to the SEC - all shorters bluff

[soul limbo] 19/11/2015 13:21

Conclusion

This is the fourth installment of our investigations into Eros. The red flags that we originally identified continue to exist, but every time we peel another layer off this onion, more and more troubling red flags are revealed. Investors should be very concerned. We have now taken the unusual step of writing to the enforcement division of the SEC and are composing a letter to the company's auditors. We have posted a redacted copy of our letter to the SEC here. Recall that the last time we did this, on UniPixel (NASDAQ:UNXL), the company ultimately received an enforcement action and its stock has declined 97% since our first article. We expect Eros' stock will decline by as much or more. We continue to believe the stock is worthless.