DALLAS - Blue Lion Capital, a shareholder of HomeStreet Inc . (NASDAQ:HMST), has publicly addressed the company's board regarding the management's potential Change in Control (CIC) payments tied to its merger with FirstSun Capital Bancorp (NASDAQ:CBNK). This comes after a recent amendment to the merger agreement that reduced the consideration for HomeStreet shareholders by $30.5 million, a modification attributed to the company's decreased profitability amidst rising interest rates.
The original merger, announced on January 16, 2024, was altered on April 30 when HomeStreet and FirstSun acknowledged the impact of a persistently high interest rate environment on HomeStreet's financial performance. The revised terms represent an 11% decrease from the initial agreement.
Blue Lion has attributed the reduction largely to HomeStreet CEO Mark Mason's decision not to hedge against interest rate risks, despite advice from FirstSun management at the time of the merger announcement.
In a recent non-binding shareholder vote, HomeStreet's shareholders opposed the CIC payments to Mason and other executives, which total $19.6 million. Chuck Griege of Blue Lion Capital expressed in a letter that it is unjust for executives to receive such payments when their actions have led to a significant loss for shareholders. He urged the board to align with shareholder sentiment and eliminate the CIC payments as part of the merger conditions.
Blue Lion has encouraged shareholders to reach out to James Mitchell, HomeStreet's Lead Independent Director, to voice their opposition to the CIC payments. The investment firm holds approximately 1.3% of HomeStreet's stock and has been vocal about its stance on the matter, highlighting the board's responsibility to its shareholders.
The information in this article is based on a press release statement from Blue Lion Capital.
In other recent news, HomeStreet, Inc. announced its shareholders' approval for the merger with FirstSun Capital Bancorp. This development, following a preliminary vote count, is a significant step towards finalizing the deal, pending regulatory approval.
Concurrently, Keefe, Bruyette & Woods reduced its price target for HomeStreet shares to $13.50, maintaining a Market Perform rating. This revision came after HomeStreet's Q1 2024 earnings fell short of expectations due to net interest margin compression, increased seasonal expenses, and a decrease in fee revenue.
Keefe, Bruyette & Woods adjusted its earnings per share estimates for HomeStreet in light of these changes, projecting a loss per share in 2024 and a profit per share in 2025. These recent developments in the merger and earnings estimates reflect the ongoing evolution of HomeStreet's financial landscape.
InvestingPro Insights
As HomeStreet Inc. (NASDAQ:HMST) navigates through its merger with FirstSun Capital Bancorp and the associated scrutiny from shareholders like Blue Lion Capital, the company's financial health and market performance remain pivotal. According to InvestingPro data, HomeStreet's market capitalization stands at $203.28 million, reflecting the scale of the business in the current market.
An important metric that stands out is HomeStreet's Price / Book ratio, which at 0.39, suggests the stock might be undervalued compared to the assets the company holds. This aligns with one of the InvestingPro Tips, which indicates that the company is trading at a low Price / Book multiple. This could be a point of consideration for investors who are assessing the company's value post-merger.
However, HomeStreet faces challenges as analysts have revised their earnings downwards for the upcoming period and anticipate a sales decline in the current year. Additionally, the company's profitability is in question with analysts not expecting HomeStreet to be profitable this year. These factors are critical for shareholders who are already concerned about the company's recent performance and the decisions made by its executives.
Despite these challenges, HomeStreet has seen a high return over the last year, with a 1 Year Price Total Return of 84.86%. This might offer some reassurance to investors about the company's potential for recovery. For those looking to delve deeper into HomeStreet's financials and future prospects, InvestingPro provides additional insights. There are currently 9 additional InvestingPro Tips available, which can be accessed with a subscription. Readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering a more comprehensive investment analysis tool.
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