One of our biggest shorts, LPS is in big…
One of our biggest shorts, LPS is in big trouble. Again. Still. Lately. Late during Friday’s trading hours, this bombshell news hit, sending the stock down nearly 7%:
One investor said that every time he looked at corporate misconduct, “No matter how bad you think it is, it’s always worse”. Lender Processing Services is proving to be a classic illustration.
The City of St. Clair Shores Employees’ Retirement System is the lead plaintiff in a class action lawsuit against Lender LPS that was amended and expanded yesterday. The suit is against the company and its three top officers, charing them with violations of Federal securities laws with the intent of inflating the company’s revenues and stock price.
Read the full filing from the City of St. Clair Shores:
City of St. Clair Shores Employees’ Retirement System v. LPS et al. Amended Complaint May 18, 2011
LPS’ stock is down fractionally again today, and more importantly, I think this one looks like it’s finally starting to break. The LPS stock chart is certainly looking “broken”. Look at how it has completely blasted through what little technical resistance there was in the high $20s:
LPS is increasingly looking at risk of being a major scapegoat for the the TBTF banks and the regulators that are trying to convince the rest of the world that there the fraud inside of the electronic mortgage title system, called, MERS, is limited in scope. LPS is at big risk here and even in the best case scenario — suspend disbelief for a moment and let’s say that LPS and MERS are totally viable and accurate and that the hundreds and thousands of civil and dozens of potential criminal proceedings against LPS and MERS are thrown out. LPS’ entire business model still only works because of the streamlined, factorized, robotized processing of mortgages and foreclosures, and that business model has to change in order for LPS to actually get up to compliance for even the problems the company has already admitted to. It’s hard to come up with a bull case scenario for this stock at this point.
With the chart breaking down and the heat on the company’s business practices and the potential for a barrage of new criminal and civil filings hitting LPS, I’m adding to the short today. I’m using both common stock and even buying some out-of-the-money puts dated out at various dates far out as I can find them to get some real leverage for the portfolio if the LPS stock and the company were to really collapse.
A little buying of the best stocks in tech on macro-economic weakness as I’d noted in my earlier post today and a little shorting of the worst culprit in the mortgage/title/robosigning fraud debacle as it breaks down. See how we’re sticking with our gameplan and using the pitches the market is throwing at us to maximize our profit set up while minimizing our loss potential?
Stick with the gameplan, it’s a good one!
