May 9, 2017, noon eastern

Possibly out of bordom, I just added about half to my small Ceapro position at $1.22. I mentioned some concerns about their reporting and I am afraid they might be too promotional with their stock price and there is a risk that their products especially on the nascent pharmaceuticals side (under development) may never pan out. Their current products are sold in the cosmetics market as in wrinkle cream ingredients. So I think this one will take a lot of patience and is speculative so I am keeping my position (bet?) quite small. But of course things could work out well which is why I am holding some. I will not likely consider buying more unless there is positive news or it slips under a dollar which is quite possible.


Speaking of speculative bets: Home Capital is selling off a billion to $1.5 billion in mortgages and is up 23% at the moment. But I see this sale as more a sign of desperation than anything. The buyer is no doubt getting the mortgages well under book value and/or Home is throwing in extra guarantees. It may be a sign that the company hopes to weather this storm. But with all the publicity and the total evaporation of confidence that may be questionable. This asset sale says to me that they have no found a buyer for the whole company or are unwilling to sell. Home Capital is HIGHLY speculative. All lenders are highly leveraged and it means that book equity can be eaten up very quickly when times get really bad (which is very rare for lenders but when it happens is devastating). A company with no debt can weather bad times for years. But a lender has massive debt (deposits) by definition and so a really bad year as in large loan losses (or selling off loans at big discounts which does trigger an accounting loss) can be quite devastating. Here Home is likely selling existing assets at a loss… I may be over-stating it but this is a bit like burning the furniture to stay ¬†alive. And perhaps the deal is not as bad as I think or else they should have disclosed the purchase price. And why is the purchase price apparently not disclosed? It was lack of disclosure that led to the securities commission charges last month.

P.S. I just read the full press releases of the last couple days. Some new Board members and a new chair so that os positive as the existing Board might have trouble seeing things impartially since for example selling the company would be an admission that the old Board members sailed the ship onto the rocks.

I see they will redeem $325 million in low interest debt next week. I was wondering why, but it is because they have to redeem as the notes come due or file for insolvency. That scheduled redemption is part of the reason they were so desperate for cash.