Q: Hi 5i: Exchange Income Corp (EIF) – It is difficult for investors to size up these negative/”short’s” reports. Many people will remember Muddy Waters’ report on Sino Forest and the subsequent disintegration of that company.
About 2 years ago Prescience Group issued a report on Student Transportation (STB), claiming that the company was effectively a Ponzi scheme, that the dividend was unsustainable, and that the intrinsic value of the stock was about $2 per share. STB dropped from 7.38 to $5.71 (intraday levels) in a little more than a week, largely on the strength of the report. Since then $5.71 has become the 2.5-year low for STB, which has made its “unsustainable dividend” payments, without reduction or interruption, for 24 consecutive months. STB shares have spent most of the past year on an upward trend between $6 and $7, although they have popped above the $7 level on a couple of occasions. The dividend yield with STB at $7 is still nearly 8%. Not bad for a stock that was supposedly worth a toonie a share!
So back to EIF, here we go again. What are we to make of Veritas Research’s disembowelling of EIF? Does this put the company’s recent management “expansion” and reshuffling in a different light? Would you be significantly concerned about EIF’s convertible debentures (especially the G series, which you seemed positive on in a previous comment)? Thanks!
About 2 years ago Prescience Group issued a report on Student Transportation (STB), claiming that the company was effectively a Ponzi scheme, that the dividend was unsustainable, and that the intrinsic value of the stock was about $2 per share. STB dropped from 7.38 to $5.71 (intraday levels) in a little more than a week, largely on the strength of the report. Since then $5.71 has become the 2.5-year low for STB, which has made its “unsustainable dividend” payments, without reduction or interruption, for 24 consecutive months. STB shares have spent most of the past year on an upward trend between $6 and $7, although they have popped above the $7 level on a couple of occasions. The dividend yield with STB at $7 is still nearly 8%. Not bad for a stock that was supposedly worth a toonie a share!
So back to EIF, here we go again. What are we to make of Veritas Research’s disembowelling of EIF? Does this put the company’s recent management “expansion” and reshuffling in a different light? Would you be significantly concerned about EIF’s convertible debentures (especially the G series, which you seemed positive on in a previous comment)? Thanks!
