RUMOURNo idea if this has any truth at all, but just heard a rumour ( on a golf course of all places!! ) that one of the big Banks is sniffing around Home Capital. . It does make sense, as Home is trading at little more than 6 times 2017 earnings. A takeover would be immediately accretive to a Bank, even if at a premium price of 40 or 42 bucks for each Home Capital share.
The big banks are trying to increase their share of personal mortgages in Canada. Where else could they buy a large portfolio of mortgages with substantial equity behind them. Substantial, because Home required a 20% down payment plus housing price increases of probably 35%- 40% over last few years gives a 50% cushion.on top of the mortgage. There is far less risk in buying mature mortgages issued by Home Capital at a substantial discount, through an offer to buy 100% of Home Capital shares, than issuing new mortgages with 10 to 20% down.
The short crowd believe the sky is falling in home prices in GTA. The point is, there is so much equity now behind the Home Capital mortgages that the risk of loss ,is really close to zero.
If an offer ever materialized around say 40 bucks a share, my guess is the share price would easily break 50 dollars a share in the short squeeze that would follow.