Investments

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…

• Accounts managed by Kerrisdale currently own shares of Urbana Corp. (URB.A and URB on the Toronto Stock Exchange), a closed-end fund with holdings in securities exchanges and financial services companies.
• Urbana is trading at a 30% discount to its Net Asset Value of $2.06. The fund owns three main assets: (1) shares of CBOE, which account for 27% of the portfolio, (2) shares of NYSE Euronext, which account for 40% of the portfolio and (3) shares in the privately held Bombay Stock Exchange, which account for 15% of the portfolio. The rest of the fund’s holdings are comprised of a variety of smaller public and privately held securities exchanges, as well as several public and private financial services companies.
• Owning the company’s portfolio at a 30% discount strikes us as a reasonably attractive proposition. The fund’s investment manager, Tom Caldwell, is an experienced veteran in the exchange space, as well as the broader financial services industry. We hope that he does not make any foolish future investment decisions. The company has been repurchasing shares, which seems to be the best use of capital given the stock’s current discount to NAV…

• Accounts managed by Kerrisdale currently own shares of Aéropostale Inc. (ARO on NYSE), a teen retailer with stores in the United States, Canada and Puerto Rico.
• ARO has historically been a well-managed retailer experiencing strong growth, above-average margins, and high returns on capital. While the company is operating at peak margins, has a maturing store base and faces tough prior year comparisons, the stock’s current valuation is nevertheless too cheap. ARO trades at 4.1x EV/EBITDA and 10x P/E. Its valuation seems too low.
• In addition, in the event of a double-dip recession, ARO is better positioned than most other teen retailers, given its low-price status within the teen fashion segment…

• Accounts managed by Kerrisdale currently own shares of Interval Leisure (IILG on Nasdaq), which runs one of the two global timeshare exchanges.
• While we like various aspects of the business and continue to be holders of the stock, the declining customer count concerns us and we’re watching it closely to see if it stabilizes.

In this post, we’re going to write about Interval Leisure Group, Inc. (IILG on Nasdaq), one of the two global timeshare exchange operators. We own shares in Interval and have for over a year. There’s numerous things we like about IILG – it operates in a duopoly, has high free cash flow margins and returns on capital, is valued at a high free cash flow yield, and the company has unique barriers to entry that protect it from competitive threats. That said, IILG is…

• Accounts managed by Kerrisdale currently own shares of PriceSmart Inc. (PSMT on Nasdaq), which runs Costco-style warehouse clubs in Central America
• PSMT is a well-managed, steadily growing company in a region (Central America) and industry (warehouse clubs) with promising long-term growth prospects. Capital allocation has been intelligent since the 2003/2004 restructuring and operational execution has been top-notch
• While not especially cheap, the valuation is low enough to warrant a place in our portfolio. The company trades at similar valuation multiples as its peers, but is posting materially higher growth / margin metrics…

• Accounts managed by Kerrisdale currently own shares of CPEX Pharmaceuticals, Inc. (CPEX on Nasdaq), a biotech company that has recently suspended its R&D efforts and is exploring a sale of itself.
• Typically, our posts focus on the investment thesis behind a given investment. While we own CPEX and think it presents an attractive risk-reward opportunity, this post will only briefly touch on our investment thesis. We’ll spend more of this post discussing the activist campaign undertaken by Richard Rofe of Arcadia Capital Advisers, because it provides an interesting case study of how activists can add shareholder value for small biotechs with multiple disparate drug businesses…