Reuters/ Jeff Zelevansky
'...this is addressed to Bill for obvious reasons - whether your testicles are bigger than your brains or your brains are bigger than your testicles?'
It was on a conference call with Luxembourg-headquartered mortgage finance company Altisource Portfolio Solution's CEO, Bill Shepro.
"...And having a sense of humor, what I'm trying to figure out to be honest with you and this is addressed to Bill for obvious reasons - whether your testicles are bigger than your brains or your brains are bigger than your testicles," he said.
Cooperman went on to slam the company for repurchasing $200 million worth of shares when the stock was trading at $104. He called it a "colossal misallocation of capital." Cooperman told the CEO that a buyback at the current stock price level would be a "no brainer," though.
Altisource's stock was last trading around $22.74 per share on Tuesday. In the last year, the stock has plummeted about 84%.
According to the most recent 13-F data, Cooperman owns just over 1.28 million shares of Altisource Portfolio Solutions.
Here's an excerpt from the investor call transcript included in the company's 8-K [via ValueWalk/ Bud Fox News]:
Operator: Leon Cooperman, Omega Advisors.
Leon Cooperman: I think you've addressed this question but because of the importance of the question I want to hear you talk about it a little bit more. And having a sense of humor, what I'm trying to figure out to be honest with you and this is addressed to Bill for obvious reasons - whether your testicles are bigger than your brains or your brains are bigger than your testicles.
The Company has had a pattern of deciding to return 100% of its cash flow to its investors by repurchase and you thought your stock was cheap I believe when you spent $200 million at $104 and obviously that was a colossal misallocation of capital.
I look at the numbers and I'm smart enough to understand if you're buying something back at $19 or $20 that you think can earn as much as 775 or as little as 435, it makes sense. But we have to obviously risk adjust that. So my question is if you took the midpoint of those numbers of $6 on 20 million shares, you're earning $120 million. If you took a third of that let's say, take $40 million, that would equate to a dividend of $2 per share which would slap a yield on the stock at 10 and you would be able to buy back less stock but you would be able to still buy back almost 20% of the Company if you decide to take the remaining cash flow and buy back stock.
So I'd just like to hear that you guys have used very sharp pencils, have been very diligent and understand that the opportunity is so extremely attractive at the current price level basically that the notion of splitting the returning of cash to shareholders via a dividend and repurchase is less sensible than just going straight out for a stock repurchase.
Then secondly, what is the timeline for this repurchase to be effectuated? In other words I understand that there some need to get your 10-K out which will take time and then shareholder approval etc. but what are we looking at? Because of the end of the day I want us to buy the stock back cheap not expensive. I don't want you to turn around and pay $30 or $40 for the stock when it's been trading actively at $17, $18 or $19. So what is the timetable for us to get into the market?
Bill Shepro: Lee, this is Bill. I will start with your second question. So we're working with our SEC Counsel now to determine whether or not we've disclosed enough information with this call to start the buyback program if we can open a window following this call. I don't know the answer yet. If it is not following this call, it would be after our 10-K is issued and following the window opening after our 10-K is issued.
Leon Cooperman:I would just say this - excuse me for interrupting you. But I really don't want to see the company being picked off. You came out - you made your statement. You made a statement for $200 million at $104 when you bought the stock back. You've now given a comprehensive forecast telling people what your plans are in terms of repurchase, telling people what you think your range of earnings is, telling people you think our stock is significantly undervalued. Find a law firm that has common sense that says you have put enough information into the market that if you want to buy back stock you could buy back stock.
And based upon our track record of repurchase I can't say we're sitting on any kind of inside information. That again, a sense of humor.
Bill Shepro: We are certainly working on evaluating. Let me address your first question. We recognize, Lee that we repurchased shares during 2014 at prices that are higher - much higher than where the stock is trading today. But if you look, we have a five-year history of substantially growing our revenue and earnings and based on what we knew at that time we believed it made sense to repurchase shares.
Now if you look at where the share price is trading today which is roughly 3 times the midpoint of our adjusted 2015 earnings per share scenario that we have just gave you today, we believe the stock is trading at a very substantial discount to its value.
So when you take a look - would you let me finish please?
When you take this into consideration along with our belief that the share buyback doesn't materially change our risk profile and that a repurchase is more efficient than a dividend we think and along with our Board that a share buyback makes more sense. And keep in mind, Lee, that management and insiders own in excess of 30% of the stock. We've also received feedback from some of our other shareholders that are encouraging us to buy back shares.
Leon Cooperman: I understand that. I'm not against it. I understand all that, I understand the arithmetic. I just want to make sure that you've crossed every T, dotted every I and you understand what you're doing. Because as I told you a year ago, stock repurchase only makes sense and only makes sense if you are buying back something that is significantly undervalued. And if it's not undervalued then you have no business buying it back. And we've made a mistake for the last year and we just want to make sure that we're not making another mistake now.
But I would say on your numbers it's a no-brainer. And you should - and I believe ver strongly that your stock is up 5 as we're speaking because of this constructive call but the idea is to buy the stock back, give the information to all your [shareholders] at the same time which you've done and then buy it back when it's cheap not when it's expensive. And I can't believe any reasonable law firm with common sense would not say you put enough information into the market that come Monday you would be able to do what you want to do. I've said enough. Thank you for listening. I appreciate it.