What has historically been one of my favorite commercial mREITs, Arbor Realty Trust (ABR), has had a blistering (and very poorly written) report published by a purported short seller. For those reading the various comment sections on this site you already know that a research firm named Ningi Research has published a paper accusing the company of massive fraud–very massive fraud. The report can be found here. The company has responded and their response is here. I won’t go into any details about the report, but suffice to say the report is written in a very child like fashion so whether this is a ‘serious’ report or not is questionable.
ABR has a number of preferred stock issues outstanding and the report has hurt the common and preferred of the company. At this time I have little or no exposure to the preferred shares.
Arbor share repurchase program:
https://www.sec.gov/Archives/edgar/data/1253986/000110465923034015/tm239931d1_ex99-1.htm
An Arbor Realty Trust (NYSE:ABR) subsidiary closed on Friday a private placement of $95M principal amount of 7.75% senior note due March 30, 2026.
I’m assuming the buyer did due diligence.
Also on SA:
https://seekingalpha.com/article/4588299-the-short-arbor-realty-report-nobody-should-read
RB
Thanks for this.
I saw the news release on this too. Not sure what Arbor had to do in the way of collateralizing the note, but on its face, 7.75% for 3 year money doesn’t sound to shabby in the present circumstances. I guess someone out there doesn’t think Arbor is total fraud.
As to the article, Kovacs was quite restrained in the criticism of Ningi in my opinion. The Ningi “report” is an amalgam of self-contradictions that no one with the most rudimentary understanding of accounting and finance would give any credence.
For what it’s worth-
Arbor filed a Form 4 today with the SEC showing that Ivan Kaufman, CEO & COB, acquired 10,000 shares of ABR common stock at 12.43/share on 3/13. Additionally on 3/13, William Green, Director, acquired a little over 4,000 shares of ABR common priced between 12.93 & 12.94/share. Both are listed as open market purchases.
Makes me feel a little better about my ABR-D and ABR shares.
Assuming Arbor just saw the “research” firm’s report yesterday for the first time, then they couldn’t give a detailed tit-for-tat response in essentially zero time even if they wanted to because it takes significant time to get the materials together, do calculations, have it all checked and write a rebuttal, and which they may never do anyway, although I’d welcome a strong quantitative rebuttal. Today’s downdraft seems to be a mix of mortgage REITs getting whacked in general (BXMT, MORT, etc.) and some follow through from yesterday’s attack on ABR. Disclosure: I added a few ABR shares today.
Slander with Criminal Intent to Profit? Sounds like an eventual settlement for costs plus damages. Sitting on my ABR-F.
Picked up full position some ATH-E at the end of Panic Day at $23.
Partial fill of HTLFP at $22, 169 shares, cancelled balance of order.
Just when I had sworn off perps! Now let’s see if I have to eat crow?
Arbor bonds are not moving. A few sales yesterday don’t see anything today. No panic sales dropping the prices to get rid of them.
Tim,
I had posted about this yesterday on RIA. There were responses from fc, rk160 and others, mostly along the lines of what you say here.
The most pervasive inconsistency (although by no means the only or most substantive one) in the report is that they in effect claim that all of Arbor’s financial statements are fraudulent, yet they rely almost entirely on those very same financial reports for their “analysis.” They present no independent evidence that anything in Arbor’s financial statements are erroneous or false. The claims of overstated income don’t stand up to even the most basic scrutiny.
Unfortunately when this kind of hit piece on a small or medium size financial institution comes out in an already skittish market for financial stocks, it has an effect.
I think Arbor was wise not to get into a point-by-point rebuttal of the invented claims in the report. Anyone who feels constrained by facts and reality is at a serious disadvantage in an argument with someone who doesn’t.
I am long ABR and ABR-F.
Thanks nhcoast for your info on RIA. I skim through there and find out what I missed and what might be interesting to the broader audience come to the home page. Your input and that from others is very much appreciated.
newbie question: what does RIA mean in this context? I understand in general it means ‘Registered Investment Advisor’, but is there an RIA website or something?
Outside looking in (and not knowing much about ABR) this reads like a former (disgruntled?) employee has been feeding this firm information. The report reads like a flat out accusation of fraud in many places. It does seem kind of ridiculous that ABR could have been perpetuating a fraud like this since 2011, and that this fraud has only just been discovered by a “research firm” located in the UK. Looking at linkedin the “founder and CEO” of this firm looks kind of like a goof…
This seems like your basic “go short and spread Fear Uncertainty and Doubt strategy” to me.
Reminds me a bit of when Bill Ackman posted a short selling “thesis” on Realty Income during the last mortgage crisis. That turned out to be completely wrong and he covered for a small loss.
That said – I did find ABR response to be kind of bland. It was almost like a non-denial denial. I guess we will find out for sure – if there is any truth to it at all, then ABR Repo lines will dry up in a matter of days. We will all hear about that.
You can find Ackman’s presentation here (for a laugh)
https://dokumen.tips/documents/ackman-realty-income-short.html?page=1
August–thought the same thing about a disgruntled employee–maybe one that is not very educated based on the quality of the grammer.
The common got whacked hard yesterday and again today. Preferreds got whacked yesterday, but are slightly higher today. Maybe sentiment is better safe than sorry on the common, and that preferred dividends can still be paid in the worst case scenario.
Retired–I think everybody is pretty ‘goosy’ now with the banking events–soot first and ask questions later.