ASPS - Altisource

[ItsAValueTrap]

The Ax Is Falling at Altisource Today

http://bostinno.streetwise.co/2015/01/14/altisource-layoffs-hit-boston-as-ocwen-problems-mount/

 

An Altisource employee told BostInno layoffs hit first thing Wednesday morning. The number was unknown, but the employee said the office rumor mill put it at 60. A spokesman confirmed Altisource has made employee cuts and issued a statement, which I've reproduced below.

 

Update: If 60 is indeed the number of cuts in Boston, it's far less than Altisource is reportedly undertaking in another city.

 

Massive Firing in Altisource Bangalore...Around 300 shown Pinkslips today..The scenario is very common in almost all companies.. #Achhedin

 

According to the last 10-K

http://www.sec.gov/Archives/edgar/data/1462418/000110465914009378/a13-24850_110k.htm

 

Altisource had 7747 employees.

 

So 360 / 7747 = 4.6%

[mcmaaaaath]

Anyone think they will take questions on this conference call? I'd like to see them answer:

 

What happens to Altisource's business if Ocwen is forced to sell MSRs in bulk? Presumably the new owner would not be obligated to use Altisource?

Why the hell hasn't Ocwen provided California all the information it requested? 

Is it possible that Ocwen's servicing rights might simply be terminated in california?

How would Ocwen go about selling MSRs if it was forced to?

Is the non-Ocwen business currently profitable? What are those margins?

Is the company currently precluded from repurchasing shares?

[Guest roark33]

Presentation for call available here.

 

http://www.sec.gov/Archives/edgar/data/1462418/000110465915002823/a15-2620_1ex99d1.htm

[thepupil]

wow!!! now that's a surprise to the upside. I lacked discipline and bought a some OCN and ASPS yesterday...I hate Erbey but these stocks are just so bombed out and levered in terms of valuation...The market is rewarding my heedless risk taking and partnering with these schmucks....for now. I should not have bought this.

 

I'm sure some of you all own 10-500X my position, but I regard this as a gamble and don't really know it that well. (insert advice here about how young idiots like me should only invest in well researched stocks managed by good people and not take dumb lotto ticket bets); the advice would certainly be relevant.

 

Sometimes dumb money is lucky money.

 

 

EDIT: And congrats to those who held and are not playing tiddliwinks with a few grand on this and are making a lot of money today.

[Picasso]

Aaand we're back to where this was a week ago.  I'm staying the hell away from these Erbey companies.  Way too much leverage and ridiculous news flow. 

 

Look at this snippet from CNBC.  OCN comes out and says one thing and a few minutes later the regulator says the opposite. 

[krazeenyc]

Presentation for call available here.

 

http://www.sec.gov/Archives/edgar/data/1462418/000110465915002823/a15-2620_1ex99d1.htm

 

Thanks Roark33.

 

While I have no idea what will happen with ASPS and incredibly skeptical regarding management, this presentation was incredibly bullish relative to a $20 stock price. The fact that it came out on sec.gov before the 11:00 call gave those who read it a huge advantage. I bought a roughly ~0% position at ~$20.70 and sold ~$32. Unfortunately it was a position ~0%. Still a couple thousand bucks. Thanks again Roark33!

[jay21]

Presentation for call available here.

 

http://www.sec.gov/Archives/edgar/data/1462418/000110465915002823/a15-2620_1ex99d1.htm

 

Thanks Roark33.

 

While I have no idea what will happen with ASPS and incredibly skeptical regarding management, this presentation was incredibly bullish relative to a $20 stock price. The fact that it came out on sec.gov before the 11:00 call gave those who read it a huge advantage. I bought a roughly ~0% position at ~$20.70 and sold ~$32. Unfortunately it was a position ~0%. Still a couple thousand bucks. Thanks again Roark33!

 

I like how your portfolios rounding errors would not be rounding errors in my portfolio.

 

Glad your trade worked.

[krazeenyc]

Presentation for call available here.

 

http://www.sec.gov/Archives/edgar/data/1462418/000110465915002823/a15-2620_1ex99d1.htm

 

Thanks Roark33.

 

While I have no idea what will happen with ASPS and incredibly skeptical regarding management, this presentation was incredibly bullish relative to a $20 stock price. The fact that it came out on sec.gov before the 11:00 call gave those who read it a huge advantage. I bought a roughly ~0% position at ~$20.70 and sold ~$32. Unfortunately it was a position ~0%. Still a couple thousand bucks. Thanks again Roark33!

 

I like how your portfolios rounding errors would not be rounding errors in my portfolio.

 

Glad your trade worked.

 

Sadly I still distrust management or else I might have been able to make some serious money -- probably should've bought some OOM calls.  If you looked at the presentation quickly -- just looking at their bear non-gaap earnings of $4+ vs bull non-gAAP earnings of almost $8 -- the likely short interest in the name and the stock at $20 the odds were very favorable that the stock would pop. Again thanks to Roark33 -- never even thought to look if the presentation would be out prior to 11AM EST.

[Guest roark33]

Glad this worked out for some.  I am generally short-biased towards the Erbey complex.  Covered around 17ish on Tuesday after the CA regulator news.  Nothing in the call today was that great.  Massive short covering and generally illiquid stock.  Lots of issues here.  They didn't buy back much stock in Q4 (or any really), which is actually the best thing from the call, but the stupid thing is that they should not have had the call, and should have just started buying stock under 20.  If they really cared as much as they talk about  capital allocation, they just made their buybacks a lot more expensive by getting on today's call and talking their book. 

 

Estimates don't anticipate much if any disruptions in pricing or sale of MSRs by OCN.  Another issue starting to crop up on call is the realization that ASPS is actually the problem behind OCN's troubles, not the other way around...

 

People don't realize, but the whole letter dating issues wasn't an OCN issue, but an ASPS issue.  At some point, the regulator may say, "If you keep blaming all of these issues on your technology, why don't we just force you to change technology providers, like we did with Green Tree."  Poof, overnight, ASPS is gone. 

 

I have yet to fully get a handle on the profitability of the non-OCN revenue, but I think everyone has just ignored that up to this point, but there were some hints on the call that this profitability mix is about to get a lot more  important.  Anyway, just some random thoughts...

 

[Guest roark33]

A good example of the opaqueness of their business.  They recognized $11m higher bad debt expense in their default management business?  Huh, they seem to imply that they are in the fee (or agency) model, not taking on collection risk.  This just doesn't make a whole lot of sense. 

[mvalue]

Glad this worked out for some.  I am generally short-biased towards the Erbey complex.  Covered around 17ish on Tuesday after the CA regulator news.  Nothing in the call today was that great.  Massive short covering and generally illiquid stock.  Lots of issues here.  They didn't buy back much stock in Q4 (or any really), which is actually the best thing from the call, but the stupid thing is that they should not have had the call, and should have just started buying stock under 20.  If they really cared as much as they talk about  capital allocation, they just made their buybacks a lot more expensive by getting on today's call and talking their book. 

 

Estimates don't anticipate much if any disruptions in pricing or sale of MSRs by OCN.  Another issue starting to crop up on call is the realization that ASPS is actually the problem behind OCN's troubles, not the other way around...

 

People don't realize, but the whole letter dating issues wasn't an OCN issue, but an ASPS issue.  At some point, the regulator may say, "If you keep blaming all of these issues on your technology, why don't we just force you to change technology providers, like we did with Green Tree."  Poof, overnight, ASPS is gone. 

 

I have yet to fully get a handle on the profitability of the non-OCN revenue, but I think everyone has just ignored that up to this point, but there were some hints on the call that this profitability mix is about to get a lot more  important.  Anyway, just some random thoughts...

 

If you listen to the call they made it clear they were having it in consultation with their lawyers because they were not clear legally to buyback without disclosing a lot of what they did...

[Guest roark33]

I was on the call and as a former securities lawyer, that was corporate speak.  There was nothing new, unless they plan to disclose something else (which would probably be bad) that they hadn't already disclosed. 

[jay21]

I was on the call and as a former securities lawyer, that was corporate speak.  There was nothing new, unless they plan to disclose something else (which would probably be bad) that they hadn't already disclosed.

 

Can you tell me how blackout periods work for share repurchases? I never fully understood the rules.

 

Thanks

[thepupil]

I was on the call and as a former securities lawyer, that was corporate speak.  There was nothing new, unless they plan to disclose something else (which would probably be bad) that they hadn't already disclosed.

 

roark, appreciate your contributions here and congratulate you on shorting the Ocwen complex. If you don't mind sharing, do you see any other potential companies or webs of companies that have issues? Yes, I'm shamelessly asking of something and giving nothing here.

 

 

[mvalue]

I was on the call and as a former securities lawyer, that was corporate speak.  There was nothing new, unless they plan to disclose something else (which would probably be bad) that they hadn't already disclosed.

 

I don't follow though - right or wrong they were clearly chomping at the bit to buy back again, why would they use corporate speak for the reasons you imply?

[ItsAValueTrap]

A good example of the opaqueness of their business.  They recognized $11m higher bad debt expense in their default management business?  Huh, they seem to imply that they are in the fee (or agency) model, not taking on collection risk.  This just doesn't make a whole lot of sense.

 

They may have been burned by fraud on the default management side / order mill fraud?

 

http://foreclosurepedia.org/ocwen-gets-subpoena-and-altisource-buries-their-heads/

 

Altisource needs to hire contractors for its default management services.  It paid middlemen.  The middlemen didn't pay contractors.  Then they declared bankruptcy.  It could be the case that Altisource is paying the contractors and is a bagholder.  (I could be wrong.)

[Guest roark33]

As for buybacks, typically companies use a 10b-18 plan after an earnings release, which indicates to a broker when to buy, how much to buy, and at what prices.  This is usually done immediately following an earnings release, so all material information is disclosed.  They seemed very eager to buyback shares last conference call and didn't, so maybe they had material information regarding the status of the NY DFS settlement status.  I don't know.  I didn't hear anything new on this call.  Perhaps, they still have more information that is preventing them.  Ironically, not buying back shares in oct has worked out well for them. 

 

As for ideas, I think this pop in ASPS is going to serve well when another shoe drops, more fighting with CA regulator, American Express leaving, Ohio AG letter, etc.  The only good news coming out about ASPS is them talking their book.  I have only focused on OCN and ASPS, so I don't know much about HLSS, AAMC and RESI although I am very skeptical of the entire Erbey complex. 

[Guest roark33]

Erbey and Shepro exercising options today. 

 

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001462418&type=&dateb=&owner=include&count=40

[mcmaaaaath]

Erbey's options expired Jan 31, so not too surprising.

 

 

[jschembs]

Erbey and Shepro exercising options today. 

 

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001462418&type=&dateb=&owner=include&count=40

 

The Shepro exercise was rather curious, but doesn't Erbey need to exercise options when he steps down from a role with the company?

[ItsAValueTrap]

Erbey and Shepro exercising options today. 

 

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001462418&type=&dateb=&owner=include&count=40

 

The Shepro exercise was rather curious, but doesn't Erbey need to exercise options when he steps down from a role with the company?

 

Seems normal to me.

 

Here's the form 4:  http://www.sec.gov/Archives/edgar/data/1048105/000128931515000001/xslF345X03/primary_doc.xml

options issued in 2009.  expiration jan 31 2015.

strike price $9.19.  So deep in the money.  He exercised them slightly early but it doesn't seem like a big deal?

[jschembs]

Erbey and Shepro exercising options today. 

 

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001462418&type=&dateb=&owner=include&count=40

 

The Shepro exercise was rather curious, but doesn't Erbey need to exercise options when he steps down from a role with the company?

 

Seems normal to me.

 

Here's the form 4:  http://www.sec.gov/Archives/edgar/data/1048105/000128931515000001/xslF345X03/primary_doc.xml

options issued in 2009.  expiration jan 31 2015.

strike price $9.19.  So deep in the money.  He exercised them slightly early but it doesn't seem like a big deal?

 

You're right - I didn't look at the 4 for Sherpo, but the timing seemed suspect given 4s typically arrive a day or two after an exercise/sale occurs.

[ItsAValueTrap]

Hmmm there may be something that Altisource hasn't disclosed since October when they stopped the share repurchases.

 

From today's conference call:

So we're working with our SEC Counsel now to determine whether or not we've disclosed enough information with this call to start the buyback program if we can open a window following this call. I don't know the answer yet. If it is not following this call, it would be after our 10-K is issued and following the window opening after our 10-K is issued.

 

The California DBO stuff started coming to a head in October.  That may or may not be it.  Insiders might know something (positive?  negative?) about that regulatory outcome that is material and nonpublic.

 

In hindsight, things with the California DBO turned sour as the regulator is currently threatening to drop a bomb on Ocwen.  Publicly they've gotten into a war of words with Ocwen (which is pretty bad for Ocwen).

 

[Guest roark33]

I agree with this point about something being up.  It doesn't really make sense for them to say, We are working with counsel to determine if we have disclosed everything on this call. 

 

If you want to disclose the facts, you put them in the script, and then you have disclosed it.  It isn't like you are waiting for someone analyst to ask the right question and no one does, so you have to wait till your 10-K. 

 

If I wasn't lazy, I would try to troll the other 48 states and figure out if any other states have actions pending against OCN.  Problem is each state has a different agency overseeing OCN. 

[Fat Pitch]

Just listened to the CC. Management is pushing hard on building out their Loan Origination business through Mortgage Builder. They will be competing with Ellie Mae. With their Lender’s One cooperative, there will be room to capture more clients. I know loan originators will only want LOS software that are backed by financially strong companies. The market is giving zero credit for this revenue stream. The pass year growth wasn’t too impressive, but when you factor in the 40%+ drop in loan origination volume for 2014 and not being a number one priority for Altisource… that’s not bad. Sherpo was adamant that they are gaining traction in this area so we’ll see how that works out.

 

Another thing I caught is Altisource is opening up their default services technology to other companies (I think Erbey is letting Altisource run free). I know this technology is most likely tainted by the failures at Ocwen, but I’m thinking there’s some value in this technology after all those years of data collection and R&D. When things settle down, I bet someone will kick the tires on it.

 

I have no idea what to think of the Property Management business. It’s going to be tied to RESI, but when you throw in Hubzu, the loan origination platform and default services capabilities that’s going to create a powerful network effect in the real estate industry. Management was very focused on Ocwen’s growth that they put their other initiatives on the back burner.  I think they have come to terms to view Ocwen as a run off business and turn their focus on becoming the market place (aka Amazon) of the real estate industry.