Eros International Plunges Further And Triggers Adjustments On The “Binary Trade”

Eros International (EROS) faced the public and once again failed to deliver reassurance. EROS management attended the Wells Fargo Technology, Media & Telecom Conference on November 11, 2016, and the stock promptly plunged. By the end of the day, the carnage totaled to a 26% loss. On the 13th, the selling resumed. I guess EROS was over-optimistic that Wells Fargo would deliver good fortune this time around.

The plunge in Eros International continues apace as the company completely fails to allay investor concerns.

Source: FreeStockCharts.com

After watching the stock plunge all over again, the company clearly felt compelled to release yet another press release…even though it seems these pronouncements are just shouts in the wind. From November 12th:

“On November 11, 2015 the management team attended the Wells Fargo Technology, Media & Telecom Conference in New York, where it did not disclose any new information to the market and only reinforced its business fundamentals. No statement was provided concerning the Alpha Exposure article dated November 10, 2015 which made further baseless allegations about the Company’s core business, its content library and film slate.”

From what I can surmise, EROS has still not addressed head-on one of the biggest concerns that launched the selling: the surprisingly rapid and large revenue growth from the United Arab Emirates (UAE). The failure to do so has left the company vulnerable and exposed to additional charges of fraud. The press release – strangely titled “Eros Says Content is at the Core of Their Business and Baseless and Misleading Allegations Don’t Change Their Fundamentals” – goes on to reiterate its confidence in the strength of its film library. Here is one key defense:

“As part of the NYSE IPO process in November 2013, the Company’s entire film library, and not just the new release slate tables, went through full due diligence in which each and every agreement was vetted. This same process was repeated for the follow-on equity offering in July 2014. Every year when the Company files its Form 20F, the Company and its auditors review the entire slate for that particular year…

…The Company has been very clear and transparent with analysts and investors on the categorization of films. Conclusions drawn purely based on Indian box office reports are grossly misleading. Such reports are compiled using informal informational sources that are not as reliable as Rentrak internationally, only include theatrically released Hindi films in India and no non-theatrical Hindi films and entirely exclude regional language films, thereby creating a distorted picture.”