To a man with a hammer... mea culpa EBIX
Long story short, I didn’t buy the short case, and I thought a higher bid was coming. But it looks like the short case had some merit, as Goldman is walking away from their bid and not paying a break up fee.
In hindsight, a few things went wrong here
1) Flat out, I was too full of myself. I was riding high off a series of successful investments (OUTD, LAKE, IFT just a few examples) and thought I could do no wrong. I thought EBIX was cheap at $20, and I thought companies would be coming out of the woodwork to buy it and the shorts were crazy to think otherwise.
2) I was greedy. Coming off the great OUTD investment, I was looking for another. I was trying too hard force the EBIX buyout into OUTD. The OUTD set up was a once in a year or two set up. The EBIX investment, to be honest, wasn’t.
3) I’d seen situations where short cases had caused huge spreads before, and I was upset I had missed them. For example, I thought the Teavana short case was weak, at best, but fear of the short case kept me from investing in a 10% in a month arb opportunity. I wanted to make up for that with this one. So I thought I was taking advantage of the short case by selling puts and minting free money.
4) On a related note to bullet one, I was having a great year. Something in me wanted to take that great year and turn it into a once in a lifetime year. Buffett has famously said he could do 50% in a year with less than a million dollars. I wanted to blow that out of the water. I wanted readers to be jealous when I posted my semiannual results review. And I was upset the bull market was keeping the S&P within sight of my results when almost all of my investments had no correlation whatsoever to the broad market.
Is the big loss I’m going to be realizing tomorrow the end of the world? Absolutely not. I probably got much too aggressive with the EBIX position sizing, but this loss will only take what was a great start to the year and turn it into a merely good one.
Honestly, it’s funny. Tomorrow I’ll likely just take a bath and sell all my shares in EBIX / buy back the puts in EBIX. I bet there will be plenty of investors joining me in that. That type of forced selling is exactly the type of situation I’d normally be interested being on the other side of. But tmr, I’ll be on the wrong side of it.
Is it a fun lesson to learn? No. Is it fun to write this post? No. But I think it’s necessary to be able to come out and admit both the good and the bad in investing.
Maybe next time I stray too far from what’s really in my circle and get too full of myself, I’ll remember this post (or a reader will remind me!) and I’ll catch myself.
Disclosure- Long (unfortunately!) EBIX. Long IFT, LAKE.