Altisource Asset Management – Glaucus Research

ALTISOURCE ASSET MANAGEMENT CORP (NYSE: AAMC) (“AAMC”), a recent spinoff from Bill Erbey’s empire of distressed real estate and mortgage interests, is the asset manager for ALTISOURCE RESIDENTIAL CORP (NYSE: RESI) (“RESI”), which owns a portfolio of nonperforming mortgages (“NPLs”) and foreclosed single-family homes. In exchange for these services, AAMC receives a quarterly incentive fee, which in Q4 2013 was equal to 32% of RESI’s dividends paid to shareholders (the “Incentive Fee”).We believe that AAMC’s Incentive Fee is at least four to seven times higher than the
compensation received by similarly situated asset managers, and as such, is a sweetheart deal that will unjustly enrich insiders with a beneficial stake in AAMC at the expense of RESI’s shareholders.

As shareholders of RESI, we believe that RESI’s independent directors have a fiduciary duty to either
terminate or substantially renegotiate its asset management agreement with AAMC.
To terminate the Asset Management Agreement between AAMC and RESI at the earliest date permitted under the contract (December 21, 2014), RESI’s independent directors must give notice of their intent to do so by June 24, 2014 (97 days from today). We expect to sue RESI’s independent directors for violating their fiduciary duty of loyalty to RESI’s shareholders unless they address the lopsided compensation deal given to AAMC. RESI’s independent directors are as follows:

  • Michael A. Eruzione (former captain of ‘miracle on ice’ 1980 U.S. Olympic Hockey team)
  • Robert J. Fitzpatrick (CFO of Institutional Mortgage Capital Canada, Inc.)
  • James H. Mullen, Jr. (President of Allegheny College in Meadville, PA)
  • David B. Reiner (Managing Director of Regional Real Estate Investment Corporation)
Company Name
Ticker
Investment Thesis
Exchange
Initiation Date
Initiation Market Cap (in USDmm)
Initiation Avg Volume (Shares per day)
Price at Initiation
Price Target
Current Price
% Change
Altisource Asset Management – Glaucus Research
AAMC
corporate governance
nyse
3/19/2014
$2,700
1,500
USD 1023.81
USD 130.07