Investments

Our slide presentation explaining our short thesis on BofI Holding, Inc. is available here and our 35-page full report is available here.

We are short shares of BofI Holding, Inc. (BOFI), a bank holding company that owns several online-only banking brands, including Bank of Internet USA and Bank X. At almost 3.5x tangible book value, BOFI is significantly overvalued, pricing in not only a long-term continuation of its rapid balance-sheet growth but also an extraordinarily strong net interest margin (NIM) and return on equity (ROE) in perpetuity. But BOFI’s margins have been inflated in recent years by well-timed purchases of distressed securities, aggressive expansion in long-duration lending, and a drastic shift toward short-term deposits…

We believe that shares of Unilife (UNIS) are more than 75% overvalued as investors have once again over-reacted to deal announcements heavy on lofty potentials but light on detail. In a sequence reminiscent of the 2003 and 2009 episodic pops in Unilife’s price, shares climbed by over 50% following the announcement of a new supply agreement with Hikma. The stock appreciated a further 17% on December 3^rd after Unilife reported a nebulous supply arrangement with Novartis. While the Novartis arrangement offers nothing in guaranteed revenue, the Hikma agreement promises $5m of upfront cash. Unilife is also eligible for a $15m payment in 2014, assuming certain milestones are met, and another $20m from Hikma in 2015. At a discount rate of 10%, the present value of these payments is just $35m. This is just one-sixth of the $210m market capitalization gain Unilife has realized in the days following the announcement…

We believe that shares of Sourcefire, Inc. (FIRE) are highly overvalued.

Our full report is available here.

Note that Sourcefire reports earnings on April 30th, and if it beats analyst estimates, the stock could rise. We’re short regardless.

Following a 55% rally since the start of 2012, FIRE shares now imply a 5.4x 2013E revenue multiple and a 204x 2013E GAAP P/E. With valuation multiples as rich as these, it might sound strange to hear that Sourcefire added only 452 new customers in 2012, the exact same amount they added in 2011. Yet FIRE’s revenue growth expanded from 27% to 35% in 2012, masking the slowing momentum in new customer adds. We can attribute this mismatch to the…

We believe that shares of EZchip Semiconductor Ltd. (EZCH) are highly overvalued.

Our full report is available here.

EZCH shares currently trade at $23.97, implying an egregious 7.5x 2013E EV/Revenue and a 32.5x GAAP P/E, surprising multiples for a business that has repeatedly demonstrated its inability to grow. As we frequently see in mispriced businesses, a high-level sector story – in this case the need for greater bandwidth on capacity constrained carrier networks – has steered investors into an overpriced stock with many idiosyncratic risks. We believe that investors are not properly assessing the competitive risks posed to EZchip’s business or the limits of the addressable market, especially in light of the EZCH’s astronomical valuation…

We believe that ServiceNow, Inc. (“NOW” or the “Company”) is highly overvalued. We are short the stock.

Our full report is available here.

The Company was taken public earlier this year at $18/share and has since ridden the cloud computing wave to a price of $30/share, implying an eye-popping 18.3x 2012E revenue multiple. Even if ServiceNow becomes the market leader and grows its share of the $1.5bn IT Help Desk market from the current 10%-15% to 30%, we believe the stock is still worth less than half of its current trading price…

We believe that ParkerVision, Inc. (PRKR) is highly overvalued. We are short the stock and stand to benefit in the event of a price decline.

Our 30-page report explaining our short thesis for PRKR is available here.

ParkerVision generates no revenue, dilutes shareholders at a breathtaking pace, and boasts one of the longest and most consistent track records of equity value destruction that we have ever come across. In his two-decade tenure as ParkerVision’s CEO, Jeffrey Parker has raised and squandered more shareholder capital than any Chinese reverse-merger CEO we can think of. As such, he deserves a place alongside Xiqun Yu, Zhiguo Fu, and Ron Chan, other ignominious targets of our firm’s detailed ‘short sale’ reports…

We believe that shares of Mellanox Technologies, Ltd. (MLNX) are highly overvalued, not only because it is a semiconductor company operating in a small and technologically fast-changing niche trading at an absurdly high valuation, but, equally as important, the Intel CPU chip upgrade cycle which fueled its past few quarters of atypical growth is about to plateau, and then sharply decline.

We are short and own put options on shares of MLNX.

Investors apparently misunderstand the cyclical nature of Mellanox’s 56 GB/s “FDR” Infiniband business and have mistakenly extrapolated the recent uptick in Q1/Q2 growth into a long-term trend. As the upgrade cycle for Intel’s…

We believe that ChinaCast Education Corp. (CAST) is misrepresenting itself in its SEC financial statements.

Our 40-page report explaining our short thesis for CAST is available here.

We have also written a letter to Deloitte LLP expressing our concerns. The letter is available here.

Kerrrisdale Capital and our clients are short and own options on the shares of ChinaCast. We stand to benefit in the event of a price decline in CAST shares, and will transact in the securities subsequent to this post. Please read our full disclaimer at the end of the report…

We believe that Advanced Battery Technologies, Inc. (ABAT) is fabricating its SEC financial statements. We believe that the company’s revenue and profit are highly overstated in its SEC filings.

In collaboration with Prescience Investment Group, we have put together a 35-page report on ABAT and why we believe it is a fraud.

Click here for our report on Advanced Battery Technologies.

If Prescience’s website is overloaded with traffic, an alternative copy is available here.

A video summary of the findings, along with discussions with certain customers, are available at the following links…

• This post expresses a bearish view on the solar industry, specifically with regard to manufacturers of solar photovoltaic cells.
• Although demand is growing, and over the long-term the solar sector will become very large, there is currently a massive oversupply of solar PV cells. This oversupply should become much worse in 2010 and 2011. Solar cells are essentially commodity products, and the large supply-demand imbalance should render most high-cost producers insolvent. Low-cost producers will also have trouble generating profits.
• Accounts managed by Kerrisdale are short shares of certain solar companies mentioned in this report

This week, I’m going to write about companies that sell solar photovoltaic cells, and how I think 50%+ may go bankrupt over the next several years. I think solar cell companies are in the fourth inning of an unmitigated disaster, and the looming supply-demand imbalance in the industry is one of the most violent I’ve ever witnessed in any commodity sector…

• In the second part of my coal posts, I analyze two coal miners: Alpha Natural Resources (ANR) and Foundation Coal (FCL). I discuss my price, tonnage and cost per ton forecasts for the two companies, ultimately deriving projected EBITDA over the next several years.
• So are coal companies cheap as a group? My answer is no, or at least ANR was not. They’re certainly not expensive, but also not irrationally cheap. But my results were interesting. My models forecast a nasty next several years for ANR but decent ones for FCL, mainly because of my bearishness for met coal relative to steam coal; FCL’s higher proportion of contracted steam coal commitments; ANR’s currently inflated margins per ton; and ANR’s somewhat higher cost structure relative to FCL’s. Current market multiples are valuing FCL at a bit of a premium to ANR, but not by much…