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Home Capital shares sell off after Berkshire Hathaways discloses it’s sold most of its stake

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Shares in Canadian mortgage company Home Capital fell as much as 18 per cent on Wednesday after word came out that Warren Buffett’s company Berkshire Hathaway had sold most of its stake in the company.

Home Capital’s TSX-listed shares were changing hands at just over $14 on Wednesday, off by more than $2 from Tuesday’s close after a press release from the company early Tuesday morning revealed that Berkshire has sold off most of what it owned in the company.

Home Capital was rocked in 2017 by allegations from regulators that the company had misled investors about some of its mortgages, which led to a run on the bank as investors pulled out their money. 

Later that summer, Berkshire stepped up with a $2-billion credit line for the company, and a $400-million equity stake to solidify its finances. Those moves had the desired result, as the stock price recovered to almost $20 a share after plunging below $10 during the lowest point in the story.

Buffett’s involvement not only gave Home Capital the money it needed to keep going, but his name lended a degree of confidence to a company that needed it at the time.

The original deal saw Berkshire buy almost 20 per cent of the company for $153 million and Berkshire wanted to increase that to more than 38 per cent by buying even more stock later.

But Home Capital investors rejected that second purchase in a vote late last year largely because the urgency had passed and Berkshire would have been buying those shares at just over $10 each at a time when the company’s public shares were trading well higher than that.

Wednesday’s press release says that since Home Capital rejected that second stock purchase, Berkshire’s stake in the company “is now not of a size to justify our ongoing involvement.”

“Although we have decided to substantially exit from our investment, we will continue to cheer from the sidelines for our friends at Home,” Berkshire said in the release.

For its part, Home Capital’s management thanked Berkshire for their investment at the time but stressed that the company is now ready to stand on its own two feet.

“Home Capital is in an excellent position to continue providing industry-leading service with a strong focus on sustainable risk management,” CEO Yousry Bissada said. “Berkshire’s investment in Home Capital provided substantive assistance to the company and created stability and value for the company and its stakeholders at a critical time in 2017.”

“Since that time, Home Capital has returned to profitability, strengthened its business and made significant progress on its strategy for sustainable growth. Home Capital is grateful to Berkshire for their support while we positioned the Company for long-term success.”

Investors didn’t respond quite as warmly to the news, however, as Home Capital shares were off as much as 18 per cent on Wednesday. “The Berkshire announcement is likely to dominate the headlines this morning as it does mark the end of an era for HCG,” Industrial Alliance analyst Dylan Steuart said, adding that he estimates Berkshire probably still owns about 2.5 million shares in the company, something that could continue to weigh on the stock price as Berkshire slowly sells those shares off in the coming weeks and months.

Steuart has a target price of $22 on Home Capital’s shares, meaning he thinks the stock will be worth 33 per cent more a year from now than it is today.

Toronto-Dominion Bank analyst Graham Ryding is somewhat gloomier, with a target price of just $19 a share for the company.

“Losing Berkshire Hathaway as a cornerstone investor is a negative, in our view,” he said in a note to clients on Wednesday. “However, we understand Berkshire’s position in that the investment is too small currently to justify.”

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Independent Consultant Beginner – 6 Should Have Pieces Of It Technology And Software

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Prima Wireless Earbuds Reviewhttps://primawirelessearbuds.net/.

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What Make Sure You Really Know Right Anyone Decide To Travel

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When traveling with children advised plan your route in advance. Do a little research and see as relevant and fun places to stop such as parks, museums or other attractions. Once you take breaks every non-chemical hours so everyone maybe even including the children probably get out and stretch their legs.

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Departure time is extremely important. Leaving early am is a proficient plan. Your offspring will be tired and possibly sleep vehicle for the first part of the trip in any case.

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Majority of Canadian workers willing to take less pay for a workplace pension plan: survey

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A majority (70 per cent) of Canadians say they’re willing to forgo a higher salary in exchange for a workplace pension plan, according to a new survey for the Healthcare of Ontario Pension Plan by Abacus Data.

The survey, which polled more than 2,000 Canadian adults in April, signals an opportunity for employers to build back the post-coronavirus pandemic working landscape better by expanding access to good retirement plans — whether they’re defined benefit, defined contribution or group registered retirement savings plans, says Steven McCormick, senior vice-president of plan operations at the HOOPP.

According to the survey, a secure retirement remains of greater concern for Canadians than concerns about their health, debt load and job security. McCormick says this has been a consistent worry the HOOPP has seen in survey results over the past couple of years. Nearly half (48 per cent) of respondents said they’re very concerned about having enough money in retirement, while 31 per cent were highly concerned about their personal debt load and 26 per cent cited their job security. Close to half of respondents expressed high concerns for their physical (43 per cent) and mental (40 per cent) health.

In addition, the pandemic has harmed the finances of more than half (52 per cent) of Canadians’ surveyed and it’s had a particularly disproportionate affect on the finances of younger adults. Adults aged 44 and younger said they’re twice as likely (25 per cent) to have had their finances greatly harmed, compared to those over the age of 60 (12 per cent).

Generally, younger adults tend to work in roles that may have been impacted most by the pandemic, says McCormick, whether in service industries that were shut down or frontline health care that have been busy but don’t always come with access to a pension plan. “Affordability is an issue, so I think their worries increased during this time.”

And while almost half (46 per cent) of Canadians surveyed said they’ve saved more money than they would have since the onset of the pandemic, among these respondents, over half (52 per cent) didn’t put any of their savings toward their retirement. Overall, most (63 per cent) Canadians surveyed haven’t set aside or saved anything for retirement in the past year, a five-point increase since 2019.

McCormick says this may be due to uncertainty or hesitancy about whether people’s immediate needs outweigh longer-term needs. And with 55 per cent of respondents noting they were very concerned about the cost of day-to-day living, he adds that rising prices have fuelled insecurity and worries so people are creating their own emergency funds right now.

While there’s a segment of the population who’ve saved more and, for them, the pandemic has created wealth, he doesn’t see this as a common narrative in the survey data. “If you don’t have access to a workplace pension or the opportunity to have things like automatic enrolment, the uncertainty of the time may have you holding onto money,” says McCormick. “In Ontario, we’re more optimistic about the pandemic than we were maybe a month ago, but there are still people worrying about whether there’ll be a fourth wave.”

In addition, more than two-thirds (67 per cent) of respondents said a retirement crisis is looming and 65 per cent said saving for retirement is prohibitively expensive. It’s a common and shared dream for many people in looking forward to a secure retirement, says McCormick, noting for many, making that dream a reality remains elusive.

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