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Noted Short Seller Marc Cohodes Comments On The Recent Events At Home Capital

Noted Short Seller Marc Cohodes Comments On The Recent Events At Home Capital

The past two months have been a roller coaster ride for Home Capital shareholders culminating in the announcement of Berkshire Hathaway’s investment in the company this week.  But the deal raises at least as many questions as it answers, not least of which is whose interests are being served?  There are many professed facts about the company and the events of the last two months that just don’t add up.  We think shareholders and the public are still a long way from discovering the truth of what has transpired at the company.  Given the evident intervention in the Home Capital drama by various arms of the Canadian government, there must be something vital to the economy at stake here.  It seems to us that a deep dive into the Home Capital story is in order.

It all starts with Gerry

The most salient fact to know about Home Capital is that it is a veritable extension of the person who ran it for almost 30 years, Gerald Soloway.  Soloway and fellow Home Capital board member John Marsh gained control of a public shell company in 1986 and merged the then tiny Home Savings of St. Catharines into the shell.  From this humble start, Soloway grew Home into the 9th largest bank in Canada, and was by all accounts, a domineering presence within the company (so domineering, in fact, that he was viewed internally as still running the company even after handing the CEO reins to Martin Reid.)  In a very real way, the culture of the company reflects the values and character of Soloway himself.  So far so good, a Canadian success story, right?  The fly in the ointment is that Soloway is a serial, convicted fraudster, going back even before the start of the Home Capital story, and it appears that many of the business practices of the company reflect his penchant for cutting corners.

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