Eisman – Financial Treason & Crime

Who (Almost) Killed Home Capital Group?

Featured Posts, Investments, 02 April 2021

I am still coming to terms with the collapse in shares of Home Capital. It wasn’t supposed to play out this way. The Canadian alternative mortgage lender saw its shares fall from an all-time high of $54.86 in August of 2014 to a low of $5.85 in May of 2017. At the time, I was working as an analyst at one of Canada’s largest asset managers. I spent 2014 and 2015 following only the Canadian banking sector. I saw the events at Home Capital up close.

The company was in the crosshairs of short sellers for years prior to its 2017 crisis. As an alternative lender in Canada’s frothy housing market, many shorts saw parallels between Home Capital and some of the worst-performing American subprime lenders. Steve Eisman, made famous in Michael Lewis’ The Big Short for his success betting against the US subprime bubble, was one of the first to come out publicly as a bear on Home Capital in 2013. And from there the criticisms continued for years. Continue reading “Article: Who (Almost) Killed Home Capital Group?”

Home Capital Group: Time To ‘Re-Charge’ Your Loan Loss Provisions

The Friendly Bear, 23 August 2016

In today’s report, The Friendly Bear goes “global”. We recently found out the hard way that making it through a TSA screen as a Bear is quite challenging, but particularly for a Bear that seeks to raise questions about a publicly traded Canadian company. Today’s report focuses on Home Capital Group (OTCPK:HMCBF)- a company that has been on the radar of numerous celebrity US short sellers (including Steve Eisman of “Big Short” fame). Some view the company as one of the best ways to play the Canadian ‘Housing Bubble’. More recently, we have watched from afar and admired the work and insight that has come out of firms such as PAA Research on the name. Given our experience in forensic due diligence into suspect US financial institutions, we thought we may be able to bring something to the table on the topic of Home Capital Group. The stock fits squarely inside the screens that we look for – commodity financial service products with too good to be true stories and alarmingly low reserves.

It also fits within our absolute favorite bucket of shorts – companies that publicly blame short sellers for their woes.

On a May 5, 2015 earnings call, Gerry Soloway, the Chairman and CEO of Home Capital Group, gave his final parting words to the investment community before riding off into retirement. After founding HCG over 30 years prior, he had grown the company into Canada’s largest “alternative lender”. He had a lot to be proud of as his accomplishments are undeniable as evidenced by the tremendous shareholder value created under his watch. We can imagine that in such circumstances, it would be hard to find just the right last words to say to stakeholders. One could reasonably expect a heartfelt speech thanking shareholders, colleagues, and family for their support over the years. Instead, Mr. Soloway provided the following quip:
Continue reading “Article: Home Capital Group: Time To ‘Re-Charge’ Your Loan Loss Provisions”