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Citron Calls Ubiquiti Networks A 'Total Fraud'

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Citron Calls Ubiquiti Networks A 'Total Fraud'
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On Wall Street, it doesn’t get much worse than the F-word. Ubiquiti Networks Inc (NASDAQ: UBNT) shares are down more than 6 percent Monday after high-profile short seller and Citron managing editor Andrew Left called the company a “total fraud.”

Left pointed out some suspiciously impressive metrics from Ubiquiti, including 33.5-percent operating margin and 49.2-percent return on equity, as the basis of his bearish thesis. “Either Robert Pera is the best CEO in networking equipment, or Ubiquiti is committing FRAUD,” Left wrote.

Secret Sauce

Left also called into question what Ubiquiti describes as its “evangelical community” of users, who allow the company to reduce advertising and customer service costs. According to Left, these claims are exactly the type of “secret sauce” claims that are typical of corporate frauds.

“While we do believe that at six or seven years ago Ubiquiti may have had an engaged WISP community, the story is now as implausible as the rest of the bull— UBNT tells Wall Street,” Left wrote.

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Corporate Culture

Left also points out what he says are “shady” business partners, lack of domestic cash balances, elevated corporate turnover and an “underbelly of corrupt corporate culture” as evidence of deception at Ubiquiti.

“The holes in their story are expanding daily and it is only time before the SEC launches the formal investigation and Ubiquiti will go down in infamy amongst the many other Wall Street Frauds,” Left concluded.

CEO Fires Back

In response to the accusations, Ubiquity CEO Robert Pera posted a succinct denial on Twitter:

Following Monday’s sell-off, Ubiquity shares are now down 12.4 percent in 2017. The company is holding a pre-scheduled investor meeting on Sept. 26, which will include a Q&A session. 

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Image Credit: By Azcarlos2 (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 4.0-3.0-2.5-2.0-1.0 (http://creativecommons.org/licenses/by-sa/4.0-3.0-2.5-2.0-1.0)], via Wikimedia Commons

Latest Ratings for UBNT

DateFirmActionFromTo
Nov 2018Credit SuisseMaintainsNeutralNeutral
Aug 2018Credit SuisseMaintainsNeutralNeutral
May 2018Credit SuisseInitiates Coverage OnNeutral

View More Analyst Ratings for UBNT
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