After closing Monday at $17.18 per share, HLSS is currently trading at $0.68 per share, a drop of more than 96%.
The dramatic fall in the company’s stock price was expected though, as the company announced last week that it plans a complete liquidation and dissolution and will issue a distribution of approximately $1.2 billion, or $16.613 per share, which was to be paid on April 27, 2015.
Under the terms of New Residential’s acquisition of HLSS, New Residential acquired “substantially all of (HLSS’) assets” and assumed “substantially all of the liabilities of HLSS," in exchange for a purchase price of approximately $1.2 billion, or $17.08 per HLSS share on 71 million HLSS shares.
Under the terms of the deal, New Residential paid a total purchase price of approximately $1.4 billion for HLSS, with adjustment for cash and repayment of HLSS’ debt. The purchase amount was comprised of approximately $1 billion of cash and 28.2 million newly issued shares of New Residential, the companies said in a previous release.
Upon the consummation of the proposed merger, holders of ordinary shares of the HLSS at the time of the merger will receive an aggregate of approximately $50 million or $0.704059 per share, and all shares of HLSS will automatically be canceled, hence the precipitous drop in HLSS’ stock.
Even though the stock drop was expected, it still looks remarkable when viewed on a one-year record of HLSS’ stock, as shown in the image below; click to enlarge (image courtesy of Google Finance).
After hovering somewhere between approximately $23 and $12 for the last year, the company’s stock rose in the wake of the New Residential acquisition, before steeply falling when trading opened Tuesday morning.
Home Loan Servicing Solutions also announced late Friday that it received a letter earlier in the week from NASDAQ, which stated that the stock exchange is delisting Home Loan Servicing Solutions, effective at the opening of business April 29, 2015.
According to HLSS, NASDAQ stated that its listing qualifications staff now believes that HLSS is a “public shell” as a result of New Residential’s acquisition of the company’s assets.
“Despite our efforts to pursue the merger as initially planned, certain circumstances prompted HLSS to pursue an asset purchase agreement with New Residential,” John Van Vlack, chief executive officer of HLSS said when the New Residential acquisition was announced.
“We believe this alternative transaction structure made the most sense for us as it allowed HLSS to file its financial results without a going concern qualification and provide the greatest certainty on funding new servicing advances,” Van Vlack added. “This transaction will also enable our shareholders to maximize value for their shares.”
(h/t Seeking Alpha)