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HomeTrust On Sale (Oaken Financial)
May 2, 2017
12:25 pm
Brimleychen
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Brookfield, Fairfax, Blackstone among buyout firms eyeing bids for Home Capital Group, sources say
http://business.financialpost......ources-say

Brimley Chen
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May 2, 2017
12:32 pm
Top It Up
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Unfortunately not the best of pursuers ... those three named companies are akin to ambulance-chasers i.e. leveraged buyout specialists.

May 2, 2017
12:57 pm
Loonie
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"It ain't over 'til the fat lady sings!"

May 2, 2017
6:44 pm
Saver-Mom
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May 2, 2017
7:37 pm
mikey1
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I have to completely disagree with Top It Up. Brookfield is a quality real estate/infrastructure company with a highly reputable name in the industry ( analysts and shareholders). There are already three companies (minimum) in pursuit of Home Capital. They obviously know a potentially good deal when they see it. Home Capital has been subjected to a lot of downside led by short sellers.

May 2, 2017
8:10 pm
NorthernRaven
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Saver-Mom said
http://business.financialpost......was-pushed

Interesting article.  

Interesting poppycock, more like. Here's the official OSC allegations document (PDF). Note that:

By February 10, 2015, the following principal investigative findings, remediation planning and action from Project Trillium were known by HCG:

  • The insured (“Accelerator”) mortgage business was down by 32.5% compared to Q3 2014;
  • Effective January 15, 2015, Accelerator volume targets were being reduced by 50% to $100 million per month;
  • HCG had terminated 4 underwriters, 2 brokerages and 30 brokers. There were a number of other brokers on management's watch list;
  • The terminated brokers had a cumulative total of $881.4 million in Originations in 2014, representing approximately 10% of HCG’s total 2014 Originations;

Home went ahead and released their financials even after this, claiming that downturns in mortgage originations were seasonal and weather related. There's a quote from their CFO noting that their generic "disclosure" was "buried pretty deep within existing wording on cyber risk. I would be impressed if someone even asked about it.". Terminating for fraud brokers that had brought in 10% of your previous year's business seems to be "material" information to me!

Note also that the OSC's interest this wasn't a bombshell in April - Home already had announced publicly in February that the OSC had notified them of preliminary intent to file these allegations. Also, here's the sanctions the OSC is contemplating - they are all about sanctioning Home and the three named Home executives in various ways, and recommending a review of Home's procedures (duh). They are not making any statements about Home's mortgage book or ongoing business, and there are no new smoking guns or revelations. The OSC is a securities regulator, and is dealing with consequences of past disclosure behaviour.

I don't see how the OSC should have assumed that doing so would be some sort of fatal blow to Home, and I don't believe companies like this should be treated like some fragile flower exempt from the normal course of regulatory action.

May 2, 2017
8:57 pm
Joe
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Top It Up said
Unfortunately not the best of pursuers ... those three named companies are akin to ambulance-chasers i.e. leveraged buyout specialists.  

wow.......up until now, I thought you knew your stuff.

May 3, 2017
12:01 am
Top It Up
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As I said before, stakeholders don't always make out very well when their holdings become salvage projects and I remain skeptic that companies such as Brookfield et al, are the "best" white knights for those same stakeholders.

May 3, 2017
4:12 am
Loonie
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re: Corcoran vs NorthernRaven (as it were):

Seems to me the middle ground makes the most sense.
Yes, the 3 officers of HCG done wrong and will undoubtedly be punished. They have already been resigning, so they know what's coming. Soloway is well into his 70s anyway and won't likely be looking for a job although he will take a heavy hit on the stock he holds, assuming he still holds it.
HCG as a corporate entity also shares the blame, but the sanctions against it which have been recommended are less, as far as I can see.
It seems to me that HCG could recover IF all it has to deal with are sanctions from OSC and if nothing else is amiss. They have already taken measures to correct the situation. Perhaps my memory is faulty but I thought they had been proactive in the first place in terminating the questionable mortgage brokers.

Seems to me that it was entirely predictable that the stock would take a plunge with the OSC findings, and that depositors would flee (especially those over 100K). But the extent of it (especially the stock decline) seems disproportionate to the events at hand. And therein lies a potential bargain for Fairfax or whomever.

It's not enough to say "they deserved it". Neither is it enough to say "they have been misrepresented in the media and there may be some funny business operating in the background". And, to my mind at least, it's not credible to say the OSC would not have anticipated the likely fallout that we have seen. Markets are fickle.

What we need to know is more about who the members of the OSC are. What interests do they really represent, based on their backgrounds? I seem to recall that Baillie used to run one of the Big 5, did he not? but perhaps I am misremembering.

But even more serious is the sensationalism of the media attention to this problem and the likely influence of short sellers - including the one who was allowed to blather on amongst us here. There is something unethical about a system that allows what amounts to manipulation of markets and public fears and sentiment. Where is the OSC in regulating this sort of behaviour?? It is not in the public interest to bring down an institution which is working pretty well, and that public interest is no less important than the one that the OSC perceives itself as addressing currently.

I am not in a position to say that there is a conspiracy afoot to shut down HCG by some of its heavyweight competitors for our money. I simply don't know. However, I will say that we do need to know. And we need to have a mechanism for finding out or preventing it from happening.

As I think I said earlier, the major people who a have suffered here are innocent stockholders who are now, 2 or 3 years after the fact, seeing their value plummet. They may essentially lose their shirts.
I don't own any of this stock, and never have. To me, however, this is an example of the irrationality of the markets. Nobody, least of all the OSC, has shown that HCG is fundamentally in trouble financially. The only reason it is in trouble right now is because of the sensationalism surrounding this "old news" whose final chapter is now being written. If people would have just hung on, nothing much would have happened except some fines and costs and a temporary downturn in profits; and nobody would be losing most of their market value.

I have one question that perhaps someone who is more experienced in the stock market can answer. In other situations, when it seems that a company is in freefall, a decision is made to stop trading. This decision has not been taken in this case. Can someone explain why not, since the company does seem to be in mortal danger due to short sellers, panicky people, and auto-selling parameters. I'm wondering if it is a sign of relative health that this has not happened. Perhaps they perceive a floor?

May 3, 2017
5:50 am
frank87
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Loonie said
re: Corcoran vs NorthernRaven (as it were):

Seems to me the middle ground makes the most sense.
Yes, the 3 officers of HCG done wrong and will undoubtedly be punished. They have already been resigning, so they know what's coming. Soloway is well into his 70s anyway and won't likely be looking for a job although he will take a heavy hit on the stock he holds, assuming he still holds it.
HCG as a corporate entity also shares the blame, but the sanctions against it which have been recommended are less, as far as I can see.
It seems to me that HCG could recover IF all it has to deal with are sanctions from OSC and if nothing else is amiss. They have already taken measures to correct the situation. Perhaps my memory is faulty but I thought they had been proactive in the first place in terminating the questionable mortgage brokers.

Seems to me that it was entirely predictable that the stock would take a plunge with the OSC findings, and that depositors would flee (especially those over 100K). But the extent of it (especially the stock decline) seems disproportionate to the events at hand. And therein lies a potential bargain for Fairfax or whomever.

It's not enough to say "they deserved it". Neither is it enough to say "they have been misrepresented in the media and there may be some funny business operating in the background". And, to my mind at least, it's not credible to say the OSC would not have anticipated the likely fallout that we have seen. Markets are fickle.

What we need to know is more about who the members of the OSC are. What interests do they really represent, based on their backgrounds? I seem to recall that Baillie used to run one of the Big 5, did he not? but perhaps I am misremembering.

But even more serious is the sensationalism of the media attention to this problem and the likely influence of short sellers - including the one who was allowed to blather on amongst us here. There is something unethical about a system that allows what amounts to manipulation of markets and public fears and sentiment. Where is the OSC in regulating this sort of behaviour?? It is not in the public interest to bring down an institution which is working pretty well, and that public interest is no less important than the one that the OSC perceives itself as addressing currently.

I am not in a position to say that there is a conspiracy afoot to shut down HCG by some of its heavyweight competitors for our money. I simply don't know. However, I will say that we do need to know. And we need to have a mechanism for finding out or preventing it from happening.

As I think I said earlier, the major people who a have suffered here are innocent stockholders who are now, 2 or 3 years after the fact, seeing their value plummet. They may essentially lose their shirts.
I don't own any of this stock, and never have. To me, however, this is an example of the irrationality of the markets. Nobody, least of all the OSC, has shown that HCG is fundamentally in trouble financially. The only reason it is in trouble right now is because of the sensationalism surrounding this "old news" whose final chapter is now being written. If people would have just hung on, nothing much would have happened except some fines and costs and a temporary downturn in profits; and nobody would be losing most of their market value.

I have one question that perhaps someone who is more experienced in the stock market can answer. In other situations, when it seems that a company is in freefall, a decision is made to stop trading. This decision has not been taken in this case. Can someone explain why not, since the company does seem to be in mortal danger due to short sellers, panicky people, and auto-selling parameters. I'm wondering if it is a sign of relative health that this has not happened. Perhaps they perceive a floor?  

+1.

May 3, 2017
5:55 am
Top It Up
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I think a telling sign of how HCG is viewed in the financial institution community can be seen in the bridge-financing packages arranged by both HCG and Equitable - HCG going with the sketchy "insider" arrangement versus the above-board Equitable arrangement, with BIG 5 banks.

http://www.theglobeandmail.com.....e34882743/

May 3, 2017
7:01 am
Brimleychen
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Loonie said
re: Corcoran vs NorthernRaven (as it were):
...
I have one question that perhaps someone who is more experienced in the stock market can answer. In other situations, when it seems that a company is in freefall, a decision is made to stop trading. This decision has not been taken in this case. Can someone explain why not, since the company does seem to be in mortal danger due to short sellers, panicky people, and auto-selling parameters. I'm wondering if it is a sign of relative health that this has not happened. Perhaps they perceive a floor?  

+1

The stock market has been highly manipulated, especially when we allow naked shorts. There is no justice or so-called public interest at all.

When you don't have it and sell it, that's scam! But we are taught that this will make our market efficient, and our minister said this shows the free market was working. LOL.

Brimley Chen
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May 3, 2017
9:02 am
frank87
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Top It Up said
I think a telling sign of how HCG is viewed in the financial institution community can be seen in the bridge-financing packages arranged by both HCG and Equitable - HCG going with the sketchy "insider" arrangement versus the above-board Equitable arrangement, with BIG 5 banks.

http://www.theglobeandmail.com.....82743/  

There's a difference here in that HCG was likely forced to find funding within 1 or 2 days, if not hours. EQB, after seeing what happened, had a week to prepare.

Also, during EQB's earnings call, they mentioned that the banks were already familiar with their mortgage book due to their dealings with them on asset-backed commercial paper. HCG didn't have similar arrangements with the Big Banks.

May 3, 2017
1:05 pm
Doug
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Brimleychen said
Brookfield, Fairfax, Blackstone among buyout firms eyeing bids for Home Capital Group, sources say
http://business.financialpost......es-say  

Actually, with Brookfield and Fairfax involved, that's actually a good outcome as, combined with a renaming and/or rebranding exercise to restore depositor confidence lost to likely "short sellers" like the aforementioned "Dr_Hubert" and "DylanMateo" on this forum, it would increase the likelihood that a renamed/possibly amalgamated Home Trust/Home Bank (perhaps under the un- or less-tarnished Oaken name) would continue independently as opposed to being "gobbled up" by a "Big 5" bank. 🙂

I just feel bad for the shareholders who bought prior to its recent $15-20 price range. 🙁

Cheers,
Doug

May 3, 2017
1:19 pm
JustMe2016
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Based on what HCG had on its books, the shares are worth $25-$28. IF ever HCG remains whole and IF there are no other skeletons in the closet, I would expect the shares to reach such target in a reasonable future. But this is a bet I wouldn't make. I'm not a gambler.

May 3, 2017
7:03 pm
Norman1
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Loonie said

I have one question that perhaps someone who is more experienced in the stock market can answer. In other situations, when it seems that a company is in freefall, a decision is made to stop trading. This decision has not been taken in this case. Can someone explain why not, since the company does seem to be in mortal danger due to short sellers, panicky people, and auto-selling parameters. I'm wondering if it is a sign of relative health that this has not happened. Perhaps they perceive a floor?  

That sounds like the single stock circuit breakers.

Home Capital Group is in the TSX Composite Index. So, a single stock circuit breaker would apply to their stock.

Their circuit breaker may have tripped many times. However, each halt in trading would only be five minutes to dampen their stock price change to less than ±10% per five minutes. This is from the TMX Order Types & Functionality Guide:

6.2.4 Single Stock Circuit breakers

Single-stock circuit breakers are an important tool to help mitigate short-term volatility in the trading of individual stocks. Recent regulatory changes introduced single stock circuit breakers. This means that a five-minute halt of trading in a security will now automatically trigger across all Canadian marketplaces if the price of the security swings 10% or more within a five-minute period.

Initially, SSCBs will apply to all securities included in the S&P/TSX Composite Index, as well as to those exchange-traded funds (ETFs) which are comprised principally of listed securities. All trades executed at more than 5% beyond the price that triggered the SSCB will be cancelled.

An hour has 12 five-minute periods. A stock that has a circuit breaker could still drop as much as

  1 - (1 - 0.10)12 = 0.7176 = 71.8%

in an hour.

May 3, 2017
7:18 pm
Loonie
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Oh. I thought I had heard about trading being halted for, for example, the remainder of a day, or even longer, in some circumstances.

May 3, 2017
7:31 pm
Norman1
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Longer stock trading halts are usually for significant pending news, like an imminent takeover announcement.

Long halts are not usually done for just a significant stock price change.

May 5, 2017
6:56 am
Loonie
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https://kmlaw.ca/cases/home-capital-class-action/
I have nothing to do with this law firm and feel ambivalent about posting it, but shareholders have a right to know.

More bad news? http://business.financialpost......r-its-life
and
http://www.cbc.ca/news/busines.....-1.4099270

Yesterday's news from the OSC hearing - put forward to June 2.
http://www.cbc.ca/news/busines.....-1.4099588
Observations from HCG's lawyer are interesting.

there seem to be a lot of ways to encourage an institution to fail, once something has gone wrong.

May 5, 2017
5:08 pm
Top It Up
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It's time to put the HCG saga to bed . There is absolutely no way they can go forward in their current guise . Doubt there is a white knight on the horizon for the current entity as a whole . This will become vultures picking the bones . CDIC insured depositers will be fine . But for certain, the shareholders will be sometime in recovery if any life support exists when all the dealing is done.

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