Endurance International (NASDAQ: EIGI) Drops on Research Report

Endurance International Group Hldgs Inc

Research Report

Today, April 28th, 2015, Gotham City Research released their report on Endurance International Group Hldgs Inc (NASDAQ: EIGI).  EIGI is a technology company that provides cloud-based solutions for small business including Domain Registration, Domain Hosting, Shared and Virtual Hosting, Malware Protection, and Data Backup Systems.  Upon Gotham City Research’s release via Twitter, the price of EIGI dropped from $22.00 to $19.00 in 5 minutes on over 1mil shares.  As word spread around Twitter and the trading community shares continued to accelerate their drop to a low of  $17.11 in 15min minutes of trading on more than 2mil shares of volume. Gotham City Research has stated in their releases that “EIGI shares will go to $0.00 per share, as the company will struggle to service its debt. Normalized EBITDA margins do not cover interest expense.

Operating on a Net Loss

Endurance International has a market cap of over $2.9 billion but trades with a relatively low float of just 73 million shares.  The company posted operating losses in 2012 of -$90 million, losses in 2013 of -$63 million, and a profit in 2014 of $12 million.  During the last three fiscal years the company has been running on a net loss.  Endurance International is listed as a HOLD and rated as a C- by The Street.  “The company’s strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.”  Despite the hold rating by The Street, Oppenheimer initiated an analysis with a Perform rating on the the company.
More Comments from the report by Gotham City Research, available on their home page.
  • An undisclosed subsidiary falsely claimed to the US Government that the FBI “recommended” them.
  • EIGI’s BlueHost, JustHost, HostGator and HostMonster hosted terrorist websites as recently as few weeks ago.
  • EIGI domains hosted 1,000s of spam/malware-related sites per spam/malware watchdogs (the hosting world’s Blinkx).
  • EIGI spends ~1/6th on core infrastructure vs Godaddy.
  • Customer reviews are consistently poor.

Short Sale Restriction

As of 12pm in New York, shares of Endurance continued to drop to a new low of $15.99.  The report by Gotham City Research is being taken seriously by traders as shares now trade down over 27% on 9 million shares of volume.  The stock has been issued a Short Sale Restriction by Nasdaq.  A Short Sale Restriction is a technique to slow down volatility and reduce the extremes of sell offs.  The rule requires short sellers to enter on up ticks.  Under normal circumstances a short seller can short a stock that is dropping, but during Short Sale Restriction, sellers must short instead when the stock begins up ticking, or moving up.  The restriction is automatically applied by the market anytime a stock drops more than 10%.
This Story is Breaking.  More information will be added as it becomes available.
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