US web outfit Endurance plunges after Gotham City points the finger
TWELVE thousand words wiped half a billion dollars off the value of web-hosting firm Endurance International yesterday after Gotham City Research launched the latest salvo in its battle against firms it alleges are worthless.
The research note, entitled A Web of Deceit, placed a $0 target price on Endurance shares, which were trading at $21.94 on Monday.
Shares fell as low as $15.83 in the hours after Gotham – which took to Twitter to declare the attack – published the report, equivalent to $540m.
Among numerous claims Gotham made in the report, it alleges 40 per cent to 100 per cent of Endurance’s reported profits are “suspect”.
It adds that Endurance’s average revenue per subscriber fell by 13 per cent instead of increasing 10 per cent, as reported by the company, and said organic revenue was 5.6 per cent not 13 per cent to 15 per cent as reported.
Gotham also claims that its organic growth is “overstated 3x”, and noted that management recently sold off 30 per cent of its stake.
It also takes aim at Endurance boss Hari Ravichandran, who it claims sold 30 per cent of the company through “dubious business practices”.
Targetting Endurance – previously owned by some of Wall Street’s most powerful investors – marks a new frontier for Gotham, which has previously taken on smaller outfits such as Gowex and Quindell.
Endurance was bought by tech-focused private equity group Accel-KKR in 2008 and sold three years later to Warburg Pincus and the private equity arm of Goldman Sachs, GS Capital Partners.
Both firms sold down their stakes in Endurance’s New York stock market listing two years ago but remain minority shareholders, with a stake worth 40 per cent.
Warburg Pincus partner Jim Neary has also been chairman of Endurance since 2011. In a statement, Endurance said: “The reality is, since going public, Endurance has beat expectations every quarter, showing consistent growth throughout the company.”
It added: “Endurance senior executives still own a significant stake in the company and are deeply invested in its future success. To suggest otherwise, is ridiculous.” Shares closed at $19.70.