Anthony Hsieh, the CEO and founder of loanDepot, has the tricky task of trying to convince analysts and investors that the mortgage lender will gain market share and remain profitable in arguably the most competitive mortgage market ever.
To demonstrate that he genuinely believes loanDepot will prevail, loanDepot’s founder and largest shareholder is putting his money where his mouth is.
Since November 2021, Hseih has invested $16.2 million to purchase 3.2 million shares of loanDepot class A common stock. The volume exceeds the total he sold during the company’s initial public offering in February 2021, the company announced on Thursday.
The total invested represents 32% of the $50.4 million in salary, bonus and other compensation Hsieh pocketed in 2020.
“I believe that loanDepot’s current valuation does not fully reflect our strong business potential or our vision for long-term growth, and that’s why I continue to invest personal funds in company shares,” Hsieh said in a statement.
loanDepot’s shares traded at $4.31 around 3:40 p.m. on Thursday, with a market valuation of $1.3 billion. Hsieh has lost about $2.2 million on his stock buys since November.
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The mortgage lender debuted in the stock market in February 2021, raising $54 million by offering 3.9 million shares at $14. The volume was far below the initial plan of raising about $362.5 million by selling 17 million shares at $21.
Hsieh held 1,059,500 shares in the first quarter of 2021 but sold his position in the third quarter, according to SEC filings. In the final quarter of 2021, the executive started to buy stocks when the prices were down.
Since the company reported its 2021 earnings on February 1, the executive invested $6.2 million in 1.6 million shares.
California-based loanDepot increased loan origination volume in 2021, which guaranteed gains in market share compared to its competitors. But the multichannel lender’s gain-on-sale margin and net income fell significantly in the fourth quarter, reflecting changing market conditions.
The company ended 2021 with a 3.4% market share, compared to 2.5% at the end of 2020.
During a conference call with analysts to comment on the earnings, Hsieh said loanDepot is well positioned to gain market share in 2022. He said that the company has a proprietary tech stack, a diverse mix of channels, and a marketing machine that controls the lead flow, customer contact, and the point of loan origination.
According to one analyst in the conference call, the explanation about how loanDepot will gain market share doesn’t appear to be resonating with investors.
Hsieh responded: “We’re obviously disappointed as well. But this is the second inning of a long game here, and we certainly are very disciplined in our approach.”
For the first quarter of 2022, assuming no material changes in interest rates or the competitive landscape, the company expects loan origination volumes to decline to a range between $19 billion and $24 billion.
The gain-on-sale margin is expected to fall to a range between 200 and 250 basis points, reflecting a more competitive marketplace.
The pressure on margins, according to Hsieh, can last one to three quarters, provided that the mortgage market stays right around $3 trillion. “Now, if it shrinks to $2 trillion, $2.5 trillion, that pressure will continue until the industry gets rightsized in capacity,” he said.
