Crazy day, especially for our LPS short….
Crazy day, especially for our LPS short. It was down more than 5% at one point today, got back into the green, and finished down on the day. LPS got hit with new subpeonas today….who would have thunk it? Ha!
We’ve been getting some press for having predicted and then having caught this huge move down in LPS:
LPS slapped with subpoenas at The Wall Street Journal(Wed 4:05PM EDT)
Our own Cody Willard has been calling for a short on Lender Processing Services (LPS) for some time. Now comes news that the Florida-based mortgage servicer has been slapped with subpoenas by the Attorneys general in California and Illinois seeking information related to robo-signing and other company practices. Shares of LPS were down around 1% in afternoon trading and off by roughly 26% since Willard added a short position last March to his Revolution Investing newsletter, published by MarketWatch:
“In some sense, LPS can be thought of as a ratings agency, in term’s of its culpability. Its business model of rapid execution of foreclosure proceedings enabled the banks to cause a crisis on such a large scale … LPS is exposed as the scapegoat for what ever comes next. In the light of day, a mutli-trillion dollar hangover, can feel pretty bad. Our mission at this point is to try to profit on the pain of their comeuppance.”
-Craig Tolliver
And also:
Shorts Close In on Lender Processing Services at Seeking Alpha(Wed 9:57AM EDT)
Cody Willard is emphatic in his explanation of the short perspective on LPS by calling LPS one of his top short ideas of the year; he even added to his position with shares and puts on Monday. Willard references the same Naked Capitalism piece I read that seemed to spark the latest bout of selling on Thursday and concludes:
LPS is increasingly looking at risk of being a major scapegoat for the the TBTF banks and the regulators that are trying to convince the rest of the world that there the fraud inside of the electronic mortgage title system, called, MERS, is limited in scope. LPS is at big risk here and even in the best case scenario — suspend disbelief for a moment and let’s say that LPS and MERS are totally viable and accurate and that the hundreds and thousands of civil and dozens of potential criminal proceedings against LPS and MERS are thrown out. LPS’ entire business model still only works because of the streamlined, factorized, robotized processing of mortgages and foreclosures, and that business model has to change in order for LPS to actually get up to compliance for even the problems the company has already admitted to. It’s hard to come up with a bull case scenario for this stock at this point.
All this makes one wonder what Thomas Schilling, Chief Financial Officer and Executive VP, was thinking when he spent $149,250 to load up on shares on November 18, 2010.
I didn’t trade today and as I’d said, it’s also my job to remind you that no trade is sometimes the right trade to make.
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