Speaking of generals shot, Life Partners Holding (LPHI) is another - a major implosion today. Infamous website Citron Research posted a negative note on the stock; some of it what appears to be hyperbole i.e. "there is competition in the space!" (thanks for the insight)
I am not going to post a defense here because frankly the stock market is the Wild Wild West and the weak get eaten. Citron for example attacked Apollo Group (APOL) [adult education] in the previous post but that is a large well known company with an analyst community to defend them. I've seen what Citron does in the past and when they attack small caps with little to no analyst support, the stock craters. So they "win" again.
Suspiciously, the stock after incredible strength had been falling off a cliff the past few days so (being a cynic) someone of decent size was told that Citron would be issuing an attack and is profiting handsomely today. In the old days I'd say "man the SEC should look into who exactly was shorting and/or buying puts the past few days" because it's quite obvious how this goes down. But nowadays I just say ... the SEC cannot even figure out Madoff when outsiders give them the key to the door, so forget it. Let's just say it is sort of funny that a stock without any weakness suddenly began taking it on the chin the previous 2 sessions on volume that is 2-3x its normal size.
Notice volume last 2 days - versus typical volume the past 3 months
Here are some of the reasons to attack
- The fees are high
- Can these fees be sustained in the future?
- The auditor is small - it only audits 17 public companies (I really hate this one because I've been involved with many small cap stocks where people come and attack the auditor because it's small)
- There is only 1 analyst
- There is competition
- Other insurance companies (i.e. AIG) are weak...
All of the above are superfluous but in combination - in a Madoff market - you can create panic very easily in a lightly traded stock. LPHI trades 100K shares many days.
The only one (of the 7 reasons) which would raise a flag to me is their comment about management background.
- We have a CEO previously sanctioned by the SEC for materially misrepresenting financial results. In the 90’s, LPHI’s CEO was the CEO of Solar King, which had a spectacular rise and fall (from over $90 per share to bankruptcy). It seems the CEO arranged for sales to dealers financed by huge uncollectible receivables. Specifically, the Complaint alleges that defendants violated the antifraud and reporting provisions of the securities laws and that the CEO made false statements to the company’s auditors, materially overstating the company’s revenues and profits. OOPS!
That one's not so good. I'll give them that.
So for now I am going to cut half the position, eat the loss and go from there. We're taking about a 27% loss on half the position (2.4% down to 1.2%) I don't want to be sitting on a 50% loss in a few days so safety over everything else. I've seen this situation before and once Citron is involved they are dogged and will put piece after piece out attacking a company. There is a reason they focus mostly on small companies.
In an ironic twist Life Partners was mentioned favorably in the Wall Street Journal just last week. That caused the only other volume spike the past 3 months.
Tough market. Congrats to those who "positioned themselves well" (randomly I'm sure) in the previous two sessions in anticipation of the release of this report.
Long Life Partners Holdings in fund; no personal position
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