Today, Forbes published a story on Eros International ($EROS) that we believe is likely untrue, fails to mention possibly contradictory information and lacks the level of journalistic integrity we would expect from a publication such as Forbes.
In the article, the author claims “ Eros Group, is in talks with Apple Inc to sell its entire content library of films and music for around “$1 billion. “ The article further claims the sale is “probable.”
The author cites no sources for his claims about the sale discussions and we fail to understand his basis for calling the sale “probable.” What is most troubling to us about the article is that it fails to mention a press release that Eros’ 60% owned subsidiary (Eros International Media) issued that appears to us to directly contradict the assertions made in the Forbes article. This press release is critical because Eros International Media owns most of the films that would be involved in the sale of Eros. On August 7, Eros International Media issued a press release stating it was “not privy to any strategic discussion that our NYSE listed parent company Eros International PLC may be having with various potential partners.”
Ordinarily, it might be possible that a subsidiary is not be privy to what its parent is doing. However, in this case we find that very hard to believe considering the significant overlap in Board Membership and Executives between the two companies. Specifically, according to Bloomberg,
- 4 of the subsidiary’s 6 Board Directors also are Board Directors of the parent company.
- The CEO of the subsidiary is also the CEO of the parent company.
Thus, we find it virtually impossible to believe that EROS will be selling itself since so many of its key Board Directors apparently are unaware of any such discussions.
We are unsure why Forbes failed to mention this press release. We also wonder why Forbes failed to mention the expensive debt EROS recently incurred or that EROS’ publicly traded bonds are yielding 20%, both of which indicate to us that the company is facing financial distress, not that it is about to sell itself for $1 billion.
WE ARE SHORT EROS