Ubiquiti - Russia, Epstein, and Diddy
Before I get into it, full disclosure I'm long $UI having bought $100K at $115/share and planning to hold forever.
With that out of the way, some of you might have read the Hunterbrook short seller hit piece about Ubiquiti last week "Ubiquiti: The U.S. Tech Enabling Russia’s Drone War"
And their follow up article "NEW: Ubiquiti Wi-Fi (And Surveillance Camera!) on Epstein’s Island"
This is my response.
If you didn't read their articles here's the TLDR:
• Pera "aided and abetted Russian war crimes by providing connectivity for the Russian military to operate drones to kill civilians"
• $28M of Ubiquiti equipment ended up in Russia, not directly from Ubiquiti, but through a complex chain of unofficial distributor networks
• Ubiquiti settled a potential civil liability in 2014 for $504K for violation of Iranian sanctions after it gave a UAE distributor exclusive rights to distribute in Iran and supplied a distributor in Greece which shipped to Iran
• Epstein and Diddy used Ubiquiti equipment per photos released by DOJ
Although not directly stated, the author implies Pera is an evil billionaire intentionally supplying sex criminals, war criminals, and putting his personal greed over human lives. Investors should sell the stock because sanctions violations will have a financial impact on the business.
Some of the top comments on YouTube:
Despite the viral success: 1.8M views, 11K likes, 5K reposts
Hunterbrook likely didn't achieve their financial goals of pressuring the stock down to make a profit short selling.
Although there was a brief 5% dip intraday when the article first hit, it bounced right back and ended the day up 4%.
Since then the stock is now up 13%. It's likely they didn't sell during the 5% dip because it was too quick and such a small gain.
I would guess they sold for a big loss yesterday to not risk the earnings report news today.
It's likely they were still holding on February 4 because, in desperation, they put out another article "NEW: Ubiquiti Wi-Fi (And Surveillance Camera!) on Epstein’s Island"
The TLDR of that was Epstein and Diddy both used Ubiquiti equipment per photos released by DOJ.
My take as an investor
As an investor I actually hoped the stock would nose dive because I would have bought more.
Not to be uncompassionate about this news, but purely from a financial point of view, regardless of the rights or wrongs done, regardless of my feelings about it, and even whether or not Ubiquiti is fined for sanctions violations, I don't believe it will have a material impact on the business longterm.
My take on the situation
• Did people forget Ubiquiti has an office in Ukraine? They're hiring right in Kyiv https://careers.ui.com/?continent=EU&office=Kyiv. And this isn't a warehouse, it's a core part of their team building software.
• There was a Russian source who said Ubiquiti is blocking firmware updates from Russian IPs, this is at least some effort on Ubiquiti's part.
• The Russians, Epstein, and Diddy also use Apple products. Should Tim Cook be held responsible for their crimes? Should we short Apple?
• $28M of Ubiquiti products ending up in Russia over 4 years is an extremely insignificant amount for a company that did $8.1B in revenue during that time period.
• This is not "corporate greed". On the contrary, Pera with a US company and public stock has a lot more to lose than to gain from this. He is not incentivized to violate sanctions.
• Considering the incredible growth Ubiquiti has had in the last 4 years, it's not a surprise to me that compliance didn't get the attention it should have.
Conclusion
I think this research by Hunterbrook is exceptional. The marketing of it was great. The animations and visuals on the site were impressive. The viral video on X was very well produced with story and emotional appeal. The reporting was, although biased, somewhat balanced by the statements that they made to Ubiquiti's credit like the firmware updates being blocked for Russian IPs.
The information was presented with implied conclusions but they weren't directly stated, this is an indication of good journalism.
Even though I disagree with some of the conclusions made, I love a good investigation and support independent journalism... although whether this is actually independent journalism or not is debatable due to short sell financial incentives.
As an investor I welcome short seller takes and seek them out so I can better understand the risks and make my own conclusions.
I agree that Ubiquiti could do more to track where their products are ending up.
For example if a device asks for a firmware update from a Russian IP the MAC could be added to a compliance todo list to try to find the distributor and unravel the supply chain to plug the leak. This was a helpful suggestion that was made in the article.
If an independent journalist can figure out how their products are flowing into sanctioned countries, there's no reason Ubiquiti can't employ a few people to do the same.