Andrew Redleaf’s Whitebox Advisors Acquires More Shares of Ocwen Financial Corp. (OCN)

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It seems that Ocwen Financial has a hard time recovering from the backdated letters sent to homeowners regarding loan modification and other issues in 2014. The company unintentionally sent improperly dated letters to some borrowers due to software errors in its correspondence systems. In some cases, borrowers facing foreclosure received letters with so-called ‘cure dates’ that were months prior to Ocwen’s letters. Just recently, the analysts from Bank of America Merrill Lynch downgraded Ocwen to ‘Underperform’ from ‘Neutral’ and cut the price target to $9.00 per share. Ocwen Financial has recently launched a cost improvement effort and aims at reducing its costs by over $150 million. However, BofA Merill Lynch believes that the cost reduction strategy is not enough in order for the company to be profitable in the upcoming years. In addition to that, the analyst asserted that Ocwen Financial will deliver GAAP EPS losses over the next quarters, mainly caused by a combination of asset sales, run-off and elevated operational expenditures.

On July 30, Ocwen Financial posted its financial results for the second quarter of the current year, which has put strong downward pressure on the company’s stock. The company delivered a net income of $10 million, or $0.08 per share, compared to $67 million, or $0.48 per share, reported a year ago. In addition, Ocwen’s revenue declined by 16% on the year to $463 million. The company’s income from operations disappointed investors as well, dropping to $111 million, compared to $208 million a year ago.

However, despite numerous downgrades and lower-than-expected financial results seen by Ocwen Financial lately, Andrew Redleaf seems to be betting on the company’s turnaround. In addition, Michael Blitzer’s Kingstown Capital Management is by far the largest shareholder in Ocwen Financial Corp. (NYSE:OCN) within our database, holding a stake of 12 million shares as of the end of March.

Disclosure: None

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