Kerrisdale's Updated Dish Short Thesis

Kerrisdale Capital attacked

in a short thesis report earlier this month. Related Link:

On Friday, Kerrisdale Capital followed up with a second report. This time, the investment firm attacked the company on alleged violation of tax laws. The investment firm also sent a Form 3949-A to the Internal Revenue Service (IRS) which details its evidence that the company improperly deducted around $1 billion per year in amortization expenses related to its spectrum licences. The form in its entirety can be seen

"Not only has DISH harmed the public interest by obtaining regulatory forbearance under false pretenses so it can hoard spectrum; it has added insult to injury by wrongfully using this spectrum to slash its tax bill to the tune of billions of dollars," said Sahm Adrangi, Chief Investment Officer of Kerrisdale Capital. "This represents yet another way that DISH has crossed the line in pursuit of profit – and yet another example of what the U.S. Department of Justice has recently called ‘DISH's extraordinary hubris.'" Kerrisdale Capital argued that Dish's actions are not permissible under the IRS which requires that an " "amortizable section 197 intangible" be "held in connection with the conduct of a trade or business." Dish is not conducting a trade or business using its cellular licenses, Kerrisdale noted. On the contrary, the company itself said in its latest annual report that it is "preparing for the commercialization" of its licenses at a time when the Federal Communications Commission held the view that " "DISH has no terrestrial operations on its…spectrum and has not announced its technology plans for the spectrum, other than to say that it has no current plan to build out facilities using its spectrum." Bottom line, Kerrisdale argued that until Dish conducts a trade or business using its cellular spectrum, it has "no legitimate grounds for benefiting from amortization" and the IRS should "not allow it."