Even before it went public many in the industry have watched magicJack and its over the top marketing campaigns with suspicion, and since the reverse merger with Vocaltec the public markets have remained doubtful. Yesterday one bear, Copperfield Research, finally declared open war and took its case against the company public. They aren't pulling any punches and the stock took a tumble yesterday in response.
Calling for regulators to investigate, they accused magicJack and its now former CEO of a wide range of misdeeds, both recent and historical, and both corporate and personal. Accounting shenanigans are alleged, and the company's R&D facility is described as a "warehouse next to a shack housing a rug an upholstery cleaning business". Copperfield then pegs a more realistic run rate earnings per share of $0.55, a far cry from what they've been pre-announcing quarter after quarter.
It's quite a read, actually, though I am not yet in a position to judge how accurate it is. The various red flags cited certainly could explain why the financial guys haven't been willing to give the company much credit. It's been quite interesting to watch them this year, from using options to power their stock buyback for a while back in the spring to the quarterly pre-announcements and huge reported earnings numbers.
Nevertheless, it's one side of the story. Will magicJack fire back? Did CEO Daniel Borislow resign after getting wind of this, or did his resignation prompt Copperfield Research to take off the gloves? And whether magicJack counterattacks or not, will the rest of the VoIP industry get smeared in the process?
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