Archive for the ‘AAMC’ category

Altisource Asset Management (AAMC) – How Will it End?

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On May 6, I wrote a note calling Altisource Asset Management (AAMC) a 2 billion dollar parasite (here). My conclusion was that RESI (the host REIT) and AAMC (the parasitic management company) were both set to tumble. Judging by the performance of each versus the market, I was dead on:

AAMC down 14%
RESI down 6%
S&P up 4%

The question that stands before us today is: what’s next? For that, I’ll rehash what I wrote on May 6:

Well, absent the market miraculously waking up from its stupidity-induced coma, there’s one other catalyst on the horizon: June 24th. You see, Glaucus has written letters to independent RESI board members attempting to get the current Asset Management Agreement replaced with an at-market rate (thereby eliminating the massive value transfer from RESI to AAMC) and June 24th is the last date the independent directors must give notice to terminate or replace the contract.

Tomorrow is D-Day for AAMC. Either the independent directors do the right thing and replace / terminate the asset management contract, or they do nothing and AAMC will continue to siphon money from RESI at the expense of RESI shareholders.

Here’s the thing: I fully expect the Board to do nothing. Because of Bill Erbey and Luxor Capital, AAMC is likely to continue to gorge itself on RESI’s cash distributions. Which means short-sellers today are going to be disappointed tomorrow.

But this is a sideshow from the real story. The real story is what’s going on in RESI’s core business.

Altisource Asset Management (AAMC) – A $2 Billion Dollar Parasite

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Bill Erbey’s empire is a complicated web of companies with inter-related interests. The history first:

AAMC Corporate Structure


The Host-Parasite Relationship between RESI & AAMC

The focus here is on RESI and AAMC’s parasitic relationship – here’s how it works:

With shared upside, no bills and no downside, the question is:

Is AAMC disproportionately benefitting at the expense of RESI shareholders?

The conclusion from Glaucus Research is an emphatic YES. RESI massively overpays AAMC.