Subscriber Discussion

Absurd That Ubiquiti UBNT Lost 25% Of Their Value On SEC Subpoena Announcement

Matt Leonard
Feb 21, 2018

John, that's info that I found... which is very vague.  It seems absurd that a company can lose 25% of its value simply because someone wants to talk to them on the record.  I guess people are of the mindset of "where there is smoke, there is fire" As UI#8 mentioned below, Wells Fargo upped their credit facility in 2017 (can't find reference to the 500M he/she stated).  I would think some DD or audited financials would have to be involved in that.

I think they have a fantastic business product line and are really changing the market both with cost and ease of use.  Anyone else ever pull their hair out trying to figure out an HP or Cisco data sheet?

NOTICE: This comment was moved from an existing discussion: 'Clowns' Allege Ubiquiti 'Completely Fraudulent'

John Honovich
Feb 22, 2018

Matt, good question. I made your comment its own topic since it was buried at the end of a 6-month-old post.

So this is not investment advice but I can provide some financial analysis to at least point out some factors here:

Even with 25% or so price drop, Ubiquiti is still valued at $4.4 billion USD, which is ~5x last full year's revenue and ~17x net profits (see 2017 10K). The latter, in particular, is comparatively low, assuming no problems.

However, consider the scenario where UBNT reported $257 million profit in fiscal 2017. If the SEC does find some irregularities, actual profit might be $200 or $150 million. At that point, the valuation of the company could be much less. This is possible even if the company, as a whole, is legitimate.

I don't know whether there are any such issues. Look at 6 months ago when Clinton first alleged this, the stock dropped almost 10% but then quickly regained it. The SEC could come back and find only minor inconsequential issues. Then the stock would likely surge.

But if the SEC comes back and finds any moderate irregularities, it would not only drop their reported earnings, it would directly justify a lower valuation and, worse, a further drop in valuation as investors would be more skeptical of their numbers, applying an effective penalty to them.

Which one of these will happen, I don't know but those are key issues one needs to figure out if investing.

Undisclosed #1
Feb 22, 2018
IPVMU Certified

It seems absurd that a company can lose 25% of its value simply because someone wants to talk to them on the record.

If you can sell the moment after the news but before the price has reacted too much, it’s the prudent thing to do.  As the price drops, it makes less sense obviously.

It’s not like you are thinking they are going to be indicted for fraud or anything, but unless you are emotionally attached to to stock, you would likely see a subpoena as a negative indicator.


Undisclosed Manufacturer #2
Feb 22, 2018

This isn't investment advice either, and I don't claim to be an expert, but when a stock [might] be overbought and overvalued on a lot of speculation (there's isn't any speculation in any markets, are there?), it doesn't take a lot for something to knock the value down back to more realistic levels if it was at a point it was overvalued.

Like John said, the company is still valued at over $4 Billion. That's a "B" folks. It didn't go to zero.

The degree of drop should be a very strong lesson to anyone who thinks about investing in the market, and how much "over valued" any company can get, and how much loss can occur if you don't look objectively and intelligently, at the value of a stock.

John Honovich
Jul 07, 2018

UBNT's stock has surged from $55 after the SEC announcement to $86.66 now:

I don't see any recent news of the SEC probe.

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