Shares of MortgageBrokers.com Holdings Inc. (OTCBB: MBKR) rebounded sharply yesterday after a freefall from its 52-week high of $2.23 on May 1, 2007. MBKR closed Wednesday at a 52-week low of 45 cents and garnered much attention with its press release announcing a research report from Dutton Associates raising its rating from “Neutral” to “Speculative Buy.”Why would a company receive a ratings bump while its stock is in a freefall? The simple answer is that MBKR is a solid company with unrealized potential that has plans in place to overcome the obstacles of the small-cap arena … but evidence must support.
Dissecting the recent filings uncovers the MBKR internal strategy which is as follows:
“The MortgageBrokers.com model, although not for everyone, successfully reverses the trend toward paying higher commissions by offering brokers and agents better tools to build value in their businesses, and resolving the long standing industry issues of agent retention, equity participation and career exit strategy.
Mortgage brokerages have long suffered from the inability to retain their top loan originators, typically losing them to competing brokerages that offer increased commissions with very little sustainable value. In addition, in this consolidating environment, many sales agents have seen the companies they work with, sold to large financial institutions or brokerages, with nothing to show from the transaction when it is they who are responsible for creating much of the value associated with the transaction. Therefore, there is pent up demand within the industry for a mortgage brokerage model that will address these long standing issues of agent retention and equity ownership. The equity participation at our company, the first of its kind in the industry, gives all mortgage sales agents and developing teamed agents an earned on-going equity stake in the company, thereby minimizing issues of agent retention and career exit strategy.
A component part of the company’s sales operations entails establishing a sustainable, well trained and performance based national agency sales force to service the borrowing and refinancing needs of individual homebuyers.”
First we take a look at the obvious reason for MBKR’s freefall through shorting of its stock by non-believers. The company is taking a unique approach in its response to collaborating short sellers by retaining the law firm of Applbaum & Zouvas to seek a temporary restraining order and preliminary injunction on MBKR’s behalf. The restraining order will allege that several market makers and depositories have acted in conjunction for the purpose of creating a naked short. Allegations include unfair competition, deceptive business practices and conversion, among other causes of action.
Alex Haditaghi – founder and CEO of MBKR – told Market News First that they are in the process of identifying the “shorters,” and took this action because they are a fundamentally strong company with solid management and nothing to hide.
Another indication that MBKR is serious about its projections is the three-for-one forward stock split planned for May 31, 2007.
“This forward stock split is intended to lay the groundwork for the anticipated growth of the company,” Haditaghi stated in a press release. “It is also part of our ongoing efforts to improve trading liquidity, broaden ownership and enhance shareholder value.”
Haditaghi told Market News First that they are still on track for the forward split.
The latest financials for MBKR come from its 10-KSB filed on April 18, 2007. Results were mixed, showing a big jump in revenue, accompanied with a bottom-line hit as net loss increased. Revenue for the year ended Dec. 31, 2006, jumped to $4,023,281 from $229,603 in 2005, and net loss for 2006 increased to $2,019,307, or 6 cents per share, from $1,140,368, or 4 cents per share, for 2005.
Investors should be chomping at the bit for a look at MBKR’s upcoming 10-QSB, due on May 15, 2007, considering its fiscal 2007 revenue projections of $40 million. Haditaghi told Market News First he expects double-digit growth in revenues, and the quarterly results will be released by the May 15 deadline. Only time and 10-Q’s will tell if MBKR is on pace for a tenfold revenue increase.
Confusion normally exists in the small and micro-cap arena. Many times, management spends energy and time worrying about stock price versus operating the company, such as in this case. MBKR will address the illegality of naked shorting while reshaping the mortgage industry in the subprime lending era.
Haditaghi will join hosts Steve Kanaval and Mike Willingham on Market News First today at 11 a.m. CDT for a live interview.
Stay tuned as they enter the Thunderdome where two men enter and one man leaves.