Yet Another Value Podcast - Findell Capital's Brian Finn on Oportun $OPRT

Episode Date: June 16, 2025

In this episode of Yet Another Value Podcast, host Andrew Walker welcomes back Brian Finn of Findell Capital for his fourth appearance. Brian, owning approximately 10% of Oportun Financial (OPRT), discusses his ongoing proxy battle to reform the company’s board. He explains how Oportun’s shift from a focused lender to an unfocused “fintech empire” led to operational bloat and shareholder destruction. The discussion probes governance failures, board entrenchment, and the recent removal of a high-performing director. Brian also outlines the investment thesis for Opportune, emphasizing its underserved customer base, strong unit economics, and potential for a major turnaround under experienced leadership. _____________________________________________________[00:00:00] Podcast and guest introduction[00:00:17] Brian's stake in Opportune[00:02:03] Overview of Opportune Financial[00:03:26] Critique of management decisions[00:04:11] Public campaign and board change[00:05:32] Legacy board's poor performance[00:06:15] Cost issues and board pushback[00:09:42] Operations improved by new directors[00:10:36] Scott Parker removed from board[00:12:02] Proxy fight motivations detailed[00:14:52] Management oversight challenges[00:16:11] Rebuttal to board's defense[00:18:01] Governance structure and concerns[00:21:34] Why Opportune is worth investing[00:23:25] Opportune unit economics breakdown[00:27:25] Rate cap policy criticism[00:30:12] Securitization and interest costs[00:34:17] October financing explained[00:38:25] Strategic oversight recommendations[00:41:01] Nominee Warren's qualifications discussedLinks:Yet Another Value Blog: https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer

You're about to listen to the yet another value podcast with your host, me, Andrew Walker. Today's episode, it is episode number, I think it's 320. I can't believe we're already up to 320. I have Brian Finn back on from Fendale Capital. Brian's been on, I believe this is his fourth time. He hasn't been on in a couple years. He is, look, he owns about 10% of Opportunity Financial. The ticker there is OPRT.

He's running a proxy fight. We came on to discuss why he's running a proxy fight, what's the upside he sees an opportunity and all of that. Obviously, he is very incentivized because he owns about 10% of the company. So you should keep that disclosure mind. You should do your own work, see our disclaimer or full disclaimer at the end of the episode. But look, I think it's a really interesting thing. We talk corporate governance.

We talk opportune, improving what the upside is, improving operations, all sorts of things. So hopefully you enjoy this episode. We're going to get to the episode 320. But first, a word from our sponsor. Today's podcast is sponsored by Dilupa. Are you still manually updating your financial models after earnings? ask yourself why. Every quarter, analysts lose hours copying numbers from filings, adjusting templates, and double-checking for errors. It's tedious, it's time-consuming, and it's a terrible

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It gives you time back where it matters most. Book a demo with the Dulupa team today at dilupa.com slash demo. That's Delupa, D-A-L-O-O-O-Pa.com slash demo. All right, hello, and welcome to the yet another value podcast. I'm your host, Andrew Walker. With me today, I'm happy to have it, it's either for the third or fourth time, but it's been a long time. Brian Finn from Findell Capital.

Brian, how's it going? Good. Thank you for having us on, Andrew. It's super excited to have you back on. Before we get started, quick disclaimer, nothing on this podcast is investing advice. There's a full disclaimer at the end of the episode. You can listen to that. But I'll also add, Brian is we're talking about opportune financial.

The ticker is OPRT. Brian owns about 10% of the company and is running a proxy campaign there. So you should keep all of that in mind, extra risk factors, extra disclosure, extra reason to do your own work. Think for yourself. Nobody's trying to form a group or anything here. But all that out of the way, Brian. I'd love to toss it over to you.

We did two podcasts way back in the day on Oppertune. I'd love to just, for listeners who haven't been listening to me for four years, quickly talk to you about what is Opertune, why are they so interesting, and then we can kind of maybe dive into the proxy fight. Sure. So Opertune is a lending company. They make small unsecured loans to underbank people, and they've had a target demographic of Hispanics.

So they've got kiosks and stores and, you know, a lot of their materials are in Spanish. So they kind of meet these people where they are in their communities. And they've got an incredible lending franchise that has really gotten messed up and destroyed by a management team and a board that, you know, is controlled by legacy board members, none of whom have any lending experience who thought to try to turn this. very simple and gem of a lending business into a fintech empire. So, you know, starting in, you know, when they went public, they started to try to add all of these other verticals and they layered on all these costs. And you saw a very simple business get, become very convoluted from a cost perspective and from a focus perspective. And so, you know, I think we began our conversations two years ago. We've been involved in the company for, you know, since March of

23. And when we first talked, you know, we talked about putting out a public letter, which we did calling for this company to massively reduce their op-X and to refocus on the core business. And so we've been involved in the saga. The stock has worked. It's gone from three to seven. And we were able to get some representation on the board last year. But we find ourselves involved in a further proxy battle as we try to make some very obvious improvements to the governance here and to prevent the CEO, Raul, from kind of having an imperial control over the board and the company, given his long history of making lots of strategic and operational mistakes or making decisions that we believe are strategically and

operationally. I'm laughing because you and I were recording this on June 12th. And this morning, the lead independent director who was retiring, published a letter. And it had a lot in it. But the whole thing was this board is super focused. We're committed. We've created great value. We've made great decisions. And I kind of would be like, you've been on the board since the beginning of time since the mid 2010s when this was formed. And the stock is down 50% over that time. And there have been massive write-offs, huge losses. And I'm not trying to lay it at any one person's feet. But it's hard to say, oh, all these people are so committed. And, like, this is perfect.

There's no need for improvement here when every, when you've got this track record, if that makes sense. No, I mean, it's incredible. You know, you've got these six legacy board members have all, you know, their tenure, TSR is all, you know, like, negative 75% for Ginny Lee and Sanders Smith, negative 60% for Joanne Verfoot, Neil Williams, Lewis Merrimontes, and Raoul. And then the guys that we've brought on, Rich Tim Boar, Scott Parker, they have a positive TSR of, you know, Scott Parker is up 190% since he joined the board. Rich Timbor is up 150%. So it's clear that, you know, independent directors who have lending experience can drive a different outcome for this company.

And the fact that this board is defending their track record is incredible. I mean, they should have at least some humility to recognize that the company got way off kilter under their watch and that it was really only brought sort of back to the focus of what it should have been focused on, which is the core lending business after we began pushing them to and kind of embarrassing them a bit through our public letters and our entreaties. And, you know, we're not experts in consumer lending and have never pretended to be. But we recognize there are people who are experts in the space.

And that's why we made a big effort to get some of them on the board. And, you know, frankly, there are just lots of obvious things that can be done, even from an outsider perspective from someone like ourselves who don't necessarily have the lending experience, but can see just how over-off the cost structure had gotten here. You know, I was just going over, you know, and trying to formulate a response to what these guys put out. You know, they claimed that they had started making this pivot in early 2022 and that they had started down the pathway of making cost cuts before we got involved in 23.

And it's just, it's a complete, you know, false retelling of history here. Because if you look at, if you look at their conference calls, you know, In November of 2022, Raoul says, quote, so we feel that the organization is right-sized today. So we actually think that our posture on expenses is very sustainable. He says this when a company is operating with a $600 million op-x, which was quadruple what it was in 2016. If you look at their loan volume from 2016 to 2023, their loan volume was actually lower in 2023 than it was in 2016. and their op-X had gone up several times. So it's just very clear from an outsider perspective

that these guys had massively bloated the cost structure here. And, you know, them getting religion on costs in early 23, you know, was very marginal. In early 23, these guys made an effort to cut expenses by $38 million on a $600 million cost structure. which was de minimis and not at all what was required to right size the expenses here, which is why we pushed for a much, much more aggressive cost reduction that March, and you know, they pushed back on it.

They didn't react all that quickly, and that's why the company, you know, they did eventually start taking out cost, but it just took them a while and they had to massively dilute shareholders here and it's just been like pulling teeth, getting these guys to do the right thing on the expense side and to do the right thing on the governance side and to do the right thing on the operation side in general. And it really wasn't until our directors came on the board in early 24 that we started to see a lot of these operating metrics normalize and be kind of more in line with some of their competitors. And when Scott Parker got on the board, you saw OPEX pro loan get cut in half, in part to his efforts of identifying kind of the right cost structure that they

needed. And what did they do? What did this board grew? Well, they rather than negotiate with us and come to some sort of settlement to improve the governance here, they shrunk the board and kicked off Scott, who very much, you know, was planning on, on, you know, running for election in the upcoming term. And this is but another example. of this company with this bloated board of legacy director entrenching themselves. Let me just jump in there, Brian. So I've got so many questions. I want to talk about the business, everything.

But look, I have been a semi-student of corporate governance recently. And one thing I thought they did was interesting was kick Scott Parker off, right? And if you look like they file, one of the nice things about an activist fight is the company files a proxy that has their background of everything that they've interacted. And if you read their background, two things kind of jumped out to me when I was prepped for this podcast, and I'm by no means an expert in this. But they say, hey, Thindale Capital asks us, 10 board members is too many. They asked us to shrink the board.

And then a couple days later, Scott Parker, the guy you put on who is the, to my knowledge, I could be wrong, pretty much the only director on here who the stock is positive under his directorship. He meets with you and discuss everything. And then a month later, as this activist fight kind of gets ready, they shrink the board from 10 to 8 and say, we're giving Findo what they want from 10 to 8. And by the way, the director that Brian put on is one of the ones who's resigning as we shoring from 10 to 8.

So when I read that course, it was a little weird to me. And I was kind of wondering, hey, this director who's had a positive experience, did he resign because he didn't want to be on the board? What was the background there? I'd love to just quickly address that. He did not resign from everything that we can tell. No, I mean, he was very much looking forward to running for election. I mean, he'd be on the board for a year, and this was going to be his first opportunity

to run for election among and be voted by shareholders, and have an opportunity to have shareholders vote on his tenure. But this was a defensive measure by this board. I mean, you have a board that, you know, it's currently 10 people, six of whom are legacy members. and four of whom are new independent members, two of whom that we brought on and two of whom were brought on through like a search firm in early 24. So you've got four people there that are going to basically act in the interest of shareholders and six people who are going to act in the interest of entrenching themselves and management.

We believe this. And at least their actions have shown so far that that's what they've been doing. So, you know, until the board dynamics change, until you have an even number of of legacy and independent directors, the legacy directors can dictate things. And Neil Williams had told us that he was planning on stepping down, so that takes the board from 10 to 9. We asked for them to reduce the board by a further person,

by one of the other legacy directors, none of whom will have lending experience, you know, who've overseen massive shareholder instruction. We've spoken to some of these directors, like we've spoken to Jenny Lee several times on calls, and she is just completely clueless about this business appears to us to be completely clueless about this business uh she's just a deer in headlights uh you know so she really has no business being on this board at all and she and the other directors you know they've been on the board

for in some case over a decade they have over subsequent votes uh you know they've not received a lot of shareholders support jini we would have not been re-elected to this for it had be not had a cooperation agreement with the company. Joanne Barefoot and Sanders Smith, in the case of Joanne Barefoot, she lost. She had more withhold votes for her than four votes, which under normal corporate governance rules would deny her a board seat, but under opportune's governance rules at the time, she was allowed to keep her board seat. And Sanders Smith, it was basically tied between withhold and four votes.

So you have a board of legacy directors who, what I can tell, appear to all be retired. none of whom have any lending experience. This is a nice gig for them to have. They're going to do everything they can to stay on this board, and that's what their actions have shown so far. So, you know, getting rid of a very competent board member like Scott, who has real lending experience, who's been the CFO of three publicly traded companies,

including OMF, which is the best in class competitor in this space. You know, that's a survival tactic for them to shrink the board and get rid of a very competent guy like that, it does nothing to help shareholders. It does nothing to help keep management accountable. And they did this at a time when the company, you know, does not have a permanent CFO. And this is a guy who's been the CFO of three publicly traded companies.

So I think, and we've gotten lots of feedback from other shareholders, that this was a very egregious action that they took. And, you know, we hope that shareholders appreciate that and vote to put Warren on the board, you know, and so that this board can have, you know, can show these legacy directors that this is not a free gig for them, they actually have to abide by their fiduciary responsibilities. And this can't just be a company that's imperially controlled by Raoul

and a bunch of legacy directors that he is friends with and who he has long histories with. So that's the purpose of this. If I can jump up, like, you know, it reminds me of, do you know the hot dog mean where it's the guy in the hot dog suit and he's like, we're all trying to find the guy who did this. And if you've seen the video, it's because there's a hot dog truck that's driven through a, uh, a suit store. But like, Timmerians and, uh, yeah, this, a lot of this reminds me of like, like, just the pushback on you reminds me of, we're all trying to find the guy who did this. It's like, look, this company in the late 2010's, it really focused. on growth, expenses got out of hand, like, yeah, you know, things made them a step, but

we're really turning around now. It's like, hey, legacy board members, CEO, like, you're all trying to find the guy who did this. You were in charge when all of these mistakes that you're kind of criticizing and saying or in the past happened. And, you know, I want to talk about the financing. Like, you were in charge when the company got so over at skis that last year they have to dilute shareholders at 10% of the equity with penny warrants in order to get a 15%

term loan. Like, you were in charge that falls at your feet. And it's kind of crazy to me that they, I'm not saying that anyone, any 10% shareholder should be given 100% of the board, but it's kind of crazy to me that they, they're out here saying, hey, there's no change needed. This board's so engaged, so sharp, so on top of things. Our largest shareholder, like, he just wants to replace a company. It's crazy.

The other thing, if I can continue my rant, you keep mentioning the legacy directors, and I won't call anyone out by name. But my favorite thing to do is go look at the beneficial ownership table and a proxy, and you see all these directors who've been along for 10 years, and, you know, they're getting paid $55,000 a year in cash, $100,000 a year in stock options, and you look at their beneficial ownership, and their actual stock ownership is, you know, maybe 2x what they're getting paid in cash. You're like, hey, if you would just let all those options best and held onto the stock,

like, you've never come out of your pocket on this. You're 75, 70, you don't have any other public directorships. Like, this is your retirement pension to you. You're not here to create your overvalue. You're here to go to one board meeting a month and to collect a paycheck. So I've remembered a lot. I want to talk about opportunes, business in a second, but I'll just turn anything I rambled on.

You want to comment on. Please go ahead. No, I think, I think, you know, as an outsider who's just kind of reading the proxies and I don't know if your shoulder or not, but like, you know, you hit the nail on the head. I mean, this is all very, very obvious stuff to somebody who's just looking at this from the outside in of what's going on here. You know, just as it was obvious to us two years ago when we got engaged,

you know, what was happening. So this isn't rocket science. I think shareholders, you know, every shareholder and stakeholder that we've talked to gets it, gets what's happening here, gets that these are people, you know, trying to protect their self-interest. And like, they're going to use, you know, they've got lots of resources. They can spend a lot of money on a proxy advisor. They can spend a lot of money on lawyers and they can, you know, create write letters and

create documents that make it seem like, oh, we're really doing our fiduciary, duty here, but the track record speaks for itself and their own behavior speaks for itself. And the facts are just blatantly, you know, clear here of how the business was, you know, under their stewardship and how it's changed, you know, with our entreaties and how it's changed even further with having some board members here who have lending experience. And, you know, we didn't want to be in a proxy fight. Like, proxy fights are not fun. It's a big suck on time.

It's a big suck on energy. And, you know, it's a stressful thing to have to do, to have to, you know, engage with a company like this. And when we went to them, we went to them with a very simple request. You know, we basically said, hey, look, you guys, you have a board. It's a huge board. It's 10 people on a, you know, small microcap, you know, not quite microcap, but a small cap company. you need to, at the very least, have some board members who have lending experience

in positions of board leadership, either as the lead director or as head of certain committees, et cetera. Because you've got a bunch of clueless, you know, and I apologize for saying this, but like woodchucks, or like little woodchucks, these board members who, you know, don't have any experience in lending,

don't even have particularly impressive resumes from our perspective. Like, I guess I apologize for using that pejorie. they won't call them woodchucks but these are people with not a lot of experience and you know we we just bunched them and asked hey look can you guys put some people with lending experience in positions of power and they wouldn't do that you know they flat out refused and then it was like hey why don't you guys reduce the board from 10 to 8 and what did they do you know well they had one guy already retiring and kneel and they kicked off the guy with the most amount

of lending experience and the most amount you know had been the CFO if they publicly traded companies, which is just an enormous, you know, um, you know, uh, crazy to me, you have your largest shareholder who put a director on the board. The company, maybe one director isn't responsible for everything, but the company finally, like, starts kind of getting at speed under it, the stock's working, the things are turning around, and then you kick them off the board. It's crazy to me, but let me switch tracks. I wanted to have you on because I, I, I, I've,

into this corporate governance kick, too, and I wanted to support somebody who, you know, I think owns a lot of the company and is kind of fighting the good fight here. But you said it earlier. Like, you're doing this at a higher level than me, but engaging with a company, it takes time, it takes energy, it's frustrating. You're running a proxy. It's costly. Most of my listeners are here for, they want to hear smart value investors talk about stock ideas. So I want to ask you opportunity, like, you run Vimdel files a 13F. People can go look at it. You run with, it's not a handful of companies, it's two handfuls of companies that you own, right? I want as opportunity, you know, as we're sitting here today talking,

why is this an opportunity, right? Why is this an opportunity worth investing in or even worth this? Why is this an opportunity worth you taking out all this time and energy to kind of change the board? Because I think a lot of people are going to look at and say, hey, you've got a subprime lender. They're trading for a little bit under book value once you account for these penny warrant, dilutions and stuff, like, what's the point? What's the alpha? Why are we really fighting here?

What are we playing for? That's a good question. And the answer is because there's enormous upside if this company's operated optimally. We think, you know, in general, the companies can perform better regardless because some of the macro tailwinds, you know, their interest costs are coming down, their net charges are coming down. you know, through the help of Scott and Rich, they've been able to kind of bend the curve there on the net charge off side.

But let me just take a step back and try to explain this business from a unit economic perspective. And this is how we tried to, you know, when we started initially engaging with these guys, we really tried to have them focus on the unit economics. You know, forget about, because they were using

all these crazy metrics. They were using like adjusted EBITDA. And I was like, no, look, you have a lending business. You got to think about it like a lending business. And for a small consumer lending company, you really have your four line items. You've got the interest rate you're charging, sort of, you know, your financing fee, your interest income. You've got the money that it costs to run the business, you know, the op-x ratio, the money that it costs to borrow to

give the loans, and then your net charge-offs. So the first amount, you know, if you deduct the other three amounts needs to be, you know, some positive number, and that's your ROA. Fingers crossed, I've seen a lot of companies that haven't managed to pull that off. Right. So what was interesting about our engagement here is, you know, when we first started to try to address the company this way, you know, the lead director, Neil Williams, really, he had no idea what the op-x ratio was. He had no idea what some of these metrics were.

You think the lead director would really have all of this kind of firmly understood and memorized. But they were trying to become a fintech company. They were trying to think about things from a totally different perspective. They were trying to argue about them being a big adjusted EBITDA grower. It's like, no, you got to focus on ROA. And the ROA of this business, if run correctly, could be 8 to 10%. And if you take that and apply it to a roughly $3 billion loan book, their loan book's a little bit lower than that at the moment, But, you know, $3 billion is kind of where they were a year or two ago. So we'll just use $3 billion.

And you apply 10% to $3 billion, and that's $300 million worth of pre-tax income. And this is a company right now with, you know, a fully diluted market cap, you know, a little bit above that. Let me pause you there. So that is in your proxifying. 8 to 10%. You're mentioning you said pre-tax ROI, right? And when I read that two things jumped out to me. 8 to 10% ROI on, even if it's pretext, is high for a lending business.

I mean, it's really high. I'm not superware, especially this company can securitize. I'm not super aware of companies that are securitizing and doing like 8 to 10% ROAs on lending businesses. I'm sure they're out there, but it's very high. And as a spot check on that one main, which reports return on assets. Now, there's our tax, but not pretext. But, you know, when I look at one main, I think they report R.O.A so far in 2000, in

2024, it was like 2%. It's generally trended around 3%. It's an aftertax number. They did hit 6% in 2021. But I look at that and say, okay, adjusted for taxes, you're kind of talking in the high threes to low fours. So what is it about opportune that can let them do 8 to 10% pre-tax ROA? Because it just seems very high to me. Yeah, so they have this, like, this very interesting niche in this moat where they're appealing to a group that, you know, they've got a ton of data on underbanked Hispanics. And this is a pretty unique demographic in that, you know, they often don't have, you know, they're, they have a different language. and they're not familiar with kind of normal credit institutions. And as a cohort, they actually overperform.

They tend to do much better, you know, when it comes to paying back loans than other cohorts that are similarly kind of in a more distressed situation. I don't know if it's due to cultural factors or what, but they tend to just generally, you know, not want to carry a lot of debt, and when they get along, they tend to pay it back. So they're in this incredible niche where they've really got the perfect consumer to appeal to. And they have, you know, they meet the consumer where they are, and they've got this growing demographic, et cetera, et cetera.

So I could spend a lot of time kind of waxing about why it's a great, you know, group. and, you know, great customer base. They're able to charge 1,000 basis points more than OMF. So, you know, I think OMF is like mid-20s. These guys can charge, you know, in the mid-30s. And one of the things that we're arguing for is that they should get rid of their interest rate cap and go a little bit higher than 36%. Because if you look at this group, their alternative to,

to using Opportune is to go to a payday lender. And what Opportunine represents is a way for these people to establish a credit score at a pretty reasonable rate relative to the alternative options. And you can do this a couple of times and then you can end up getting a credit card or being part of the more traditionally banked universe of customers. So it's a great customer base.

They can charge them a much higher interest rate than OMF can. The issue here has been their op-x ratio. OMF is at like a 7% op-x ratio and Opportunen has been as high as 20. They need to reduce that and the net charge-offs got too high. You know, this is a business that could do

net charge-offs of, you know, 8 to 10% and they've gotten, you know, as high as 12, 13, 14%. So where we think there's an opportunity here and how we get to that that 8 to 10% number is, you know, you start out with

I'll pull up the chart here. So you remove the interest rate cap and you're able to charge an extra 250 basis points in APR that gets you to... If I can just, on the interest rate cap, Yeah, A, I think it speaks really highly to your due diligence, spotting that and thinking through it.

I don't think there's any person who listens to an investing podcast who's going to argue against, like, look, interest rate caps. It sounds nice. We're not going to charge people more than 36%. It's the same with rent controls and stuff. Like, it creates all sorts of tack-on issues, especially here, as you said, you go to a payday lender and you can get 100% interest rate, or these guys are capping themselves at 36.

If there's nothing in between, that's a huge issue, right? because there's loans you could profitly make and that people take it at 50%. And you're rejecting them. It's like you're impacting your ability to profitly grow. It's just so silly. And I love that you were pointing this out, pointing this out because it's a silly policy, in my opinion.

I don't know why a bank, I mean, maybe a JP Morgan would have it because they're worried regulators are going to come shut them down and impact their entire franchise. But a small cap company to just self-impose a 36, I'm no expert in consumer lending, but it was silly to me. And I thought it just spoke. really well to your due diligence to point this out and point out how crazy it was. Yeah, in Opportunance on Materials, they have, they lay out the cost to borrow $1,500

and with the, you know, through the different channels. So an online only payday lender, it costs you $3,500 to borrow $1,500. Installment lending or rent or, yeah, installment lending is $1,000. Opportunines at $500. Yep. So it's like, you know, you're talking. talking about going from 500 to maybe, you know, 530 or 540 or 550 and that opens up a whole other spectrum of borrowers here. And, you know, you're getting more margin. So it's a win for the customers and it's a win for you. You know, I'm not saying that all of their loans need to go above 36%. Yeah, yeah, you don't hit them with 40%, but you shouldn't be turning down people who you could properly lend to at 42% just because you've got a self-imposed cap.

I want to talk financing real quick, and I want to talk that in two ways. First, I'd love to talk securitization. I mean, the company just did a big securitization. This is June 5th. They do a $440 million securitization, 5.67% annual yield, like really great. Second securitization so far this year. I'd love to talk about what the securitization market is telling you about their loans, their business, all that sort of stuff.

And then I have kind of a harder question. on the October financing. Yeah, I mean, it's hardening to see that their cost of financing has come down here. And I think that was a real risk, you know, in the darker days a year and a half ago was that, you know, what if the financing markets freeze up for them, given the sort of situation that they were in? And, you know, I think through having the experience of Rich and Scott on the board and Carlos as well, that they'd been able to get better deals with these, you know, these different lending facilities

and the cost of financing has come down a lot. I mean, that's 200 basis points over their prior financing. And you apply that out over, again, a $3 billion loan loan book. That's a fair amount of margin there. And this was a $500 million deal. So, you know, 500 million, 2% spread. That's 10 million interest rate saved. It's financing a $6,000. their book, 10 million on, this is a 250, 300 million markup company. Like, that is a huge.

And that's why, you know, I think our point here is, I think the business is going to work regardless going forward, you know, due to the changes that we've advocated for, due the presence of some people now that have

lending experience. Our concern, though, is a long-term existential risk of having the legacy board members, you know, essentially give Raul's sort of imperial powers, and, you know, they've shown no ability to provide oversight to him, and Raul obviously kind of left his own devices, can't seem to help himself and make lots of poorly consider strategic

and operational decisions. And if he had better oversight or you had better management, you could drive this business to that 8 to 10% ROA target. You know, they don't have to get to 8 to 10% for this to be a massive home run of a stop. You know, that's kind of a, you know, what we outlined in our presentation is that's a conceivable target here from a, you know, boosting the APR by 2.5%, you know, a slight reduction in the cost of funds, you know, getting the OPEX ratio further reduced from where it is today. And if you can get anywhere close to that, you know, you're looking at a business. it's just throwing off a ton of cash.

Let me ask, so on the one hand, I see the ABS financings are getting better and better. They've got asked his securitization market. I'd love to talk about the financing in October. So this is the financing for people who are listening to October 29, 2024. They do a big financing with, I believe it's Newburger and Castle Lake, big term loan at a 15% interest rate, and alongside that, they have to give the lenders, basically 10% of the company in penny warrants in order to get this term loan. So, like, I kind of see, on one hand, I see a company, you know, full access to the ABS

markets, interest rates, improving all that sort of stuff. On the other hand, I see a company that, hey, last October had to do one of the more distressed financing I've seen, you know, hugely dilutive. I think it speaks poorly to a lot. You know, if I was voting for the board of directors, just that financing alone would be like, hey, you really got over your skis. You've got a lot of explaining. But I'd love to just speak about, like, what you, what happened with that October financing

that led to it and why you don't think, you know, if I said, hey, this business needs to pay 15% plus 10% of the company in penny warrants, you'd say, oh, this is a business that's in true to stress. It's not a great business. So I'd love to talk about what happened there and why you don't think it's kind of reflective of the business as is. Who? I guess to start, I'm just pulling up a slide here.

to start, you know, these guys, you know, they had to do a financing in Q1 of 23, of 23. And they, you know, they kind of did a good job of sort of disguising it. And this was to Newberger. And that also involved warrants and dilution. And they needed to basically kind of take out that financing through a new finance. I do think that, you know, it was a great deal for Newberger and Castle Lake and, you know, the loan is being quickly paid down and the company is in a much, much better position today. So, you know, it's terrible that they had the, you know, you have a management team that's had to do these, these types of financing deals. You know, it's great, obviously, for the creditors.

But, you know, it just kind of shows the degree to which the company had to do. had been, you know, the legacy board and the management team had mismanaged this thing to the point where it needed this type of capital to keep the business going. But I think the good news is that, you know, that term loan should hopefully be paid off here or refinanced at a much lower rate, you know, over the next couple of quarters. And then the company is able to produce a ton of cash going forward as they get, you know, to that mid-to-high single-digit ROI. One thing I almost wanted to throw my computer out the window.

I'm looking at the slide right now. It's slide five of the October deck. And they say, hey, great news on this financing. Our current home loan was 17%. And we're going to be paying about 15% on this term loan, right? And I almost wanted to throw my computer out of the window. It was like, hey, you had to dilute yourself by 10% with penny warrants. I think the stock was, I can't remember what it was at the time.

But you're giving away millions and millions of dollars to the lender with this loan. And you're just pretending that cost doesn't exist. And like, when I've seen people in my mind, that's a company that they think their stock is funny money. You know, they don't care about the shareholders. They don't care about shareholder returns. They gave away 10% of the company. Whatever, we got a 15% interest rate. We gave away free money there.

That's incredible. You've done it's incredible how. Yeah. I mean, look, I just think it kind of speaks to. the positioning and the motivation of these legacy board members and of Raul, you know, which is, hey, this is a nice gravy train. We're just going to keep riding it. Yes. That's what we believe their position has been. And not, let's try to drive this to the highest possible, you know, ROA. Again, it's getting there, you know, because of some of these changes that we've made. But there's

just such an enormous upside here. We believe there's such enormous upside if, you know, if, you know, you really increase the oversight and if you had more capable, competent people kind of driving the direction from above. Let me, please switch. So as you guys talk, again, you, if anybody's looking at this, you need to look at the book value and adjust for the penny warrants that they issued. So I think book value is around $8 per share right now. Let me lay out an upside case. $8 per share, $1.50 in earnings over the next 12 months. I think the gap earnings it might be a little bit lower, but let's just, let's say $1.50, so that gets you to about a $9.50 stock price. One main, or sorry, $9.50 book value. One main trades for about two

times book. You've laid out reasons why you think the return on assets here might be higher than one main. But would I be crazy if I said, hey, the upside bryan's kind of playing for in a well-put-together opportune is $9.50 in book, 12 months out, trading for approaching two-time book. You're talking about a $19 stock price versus $7 today. Would that be a fair way of framing it or do you think there's other ways that either result in a value higher or lower? No, we believe that's pretty

accurate. I mean, there's a bunch of ways you can kind of slice this, but we certainly think that it should be trading above above book value. And the fact that it's not, it just kind of speaks to the lack of confidence that folks have in this board and in Raul. And if you had again, better oversight

driving the company here and he didn't have a bunch of legacy board directors controlling the show, you know, we think there'd be a lot more shareholder interest. When you look at a, when you look at just read their Q1 results and they say, hey, our ROE was 11% our adjusted ROE was 21%. A big piece of that breakdown is the amortizing the ABS, which I'm not sure how real or not that is, but either one, when I was like, oh, you've got a double digit ROI, like let's call

it teens on a run rate basis and straighting below book, like one of those two don't belong together, you know? So it just speaks, it speaks to people's, you know, kind of. credulity or in credulity. Agreed. I think we've covered most of my questions. Again, I wanted to talk about the business a little bit, but I just think you're, you know,

I've become increasingly disillusioned with this, and I'm really happy, even though we don't have a position, really happy to help you kind of lay off the case and drum up some support here. Anything else we should be talking about on Appertune? No, look, I mean, I didn't mention Warren at all. You know, Warren's... Warren, just for the people,

This is the director who Brian's nominating to kind of replace the CEO on the board. Exactly, yeah. So Warren, you know, has an incredible amount of experience in consumer lending, you know, super senior guy. You know, again, because it's totally independent from Fendell, just as Scott and Rich have existed independent from us. You know, these are all people. It's like I've never met any of these people. These are just people that have great resumes that have a lot of experience in the space. And it's kind of like, look, you know, these are my high-level thought.

that you know the business way better than I do. You know, just go in there and serve shareholders. Do the right thing by shareholders. You know, you don't have any personal loyalties to anybody on this board or to the management team. You don't have any, you know, sort of loyalties to decisions that were made in the past, you know, so you're not wedded to some cost structure or some view of how things should work.

You know, you're going to approach this from like a first principles basis. basis. We know this is a great lending business. We know this. They have a great moat. They've got a great niche. They serve a great cause. You know, go in there and do right by shareholders. And that's been, you know, again, if the board members came in there and they, and, you know, they had entirely different views from mine, you know, seeing it from the inside, that I would defer to them because I'm not sitting on the board. I'm not privy to a lot of the the information that they have. But I think it's so important for boards to be composed of people that have experience in the industry, and it's crazy that Opportunity has no one on the Legacy Board who had any experience in lending.

And like, that's your business. You've got to have people that know lending. Lending's a very different type of business than tech, you know, or retail, or accounting, which is where all the Legacy Board members come from, or nonprofit. You know, lending businesses are valued differently. They have different risks.

et cetera. So you've got to have people with lending experience, you know, in positions of power on the board, especially in a situation like Opportunen, where you had a CEO that just went so far off the reservation for a number of years. You've hit the nail on the head. Like, you've got people who have no non-lending experience and Opportunity got in trouble. What's the scariest thing for an investor? A fast-growing lending business. And you had a lot of people without lending experience. And in my opinion, that's where you get into it. You have an empire builder, people without about lending experience, grow, grow, grow, grow, grow. Oh, gosh, three years from now, the chickens come home to Roos,

because that's when the lemmian business that's growing quickly, that's when it comes home to roost. In three years, when the growth just starts to slow. So I think you've identified all the issues there. Yeah, I appreciate it. And I apologize for, you know, I don't mean to use pejoratives on this, on this podcast. I don't think, you know, the legacy directors are all, you know,

I'm sure they're all perfectly nice, kind people, you know, have nothing against them personally, but I do take issue with their attempts to entrench themselves and, you know, the lack of care that they've shown towards, towards their own duties and towards shareholders. It's the incentive system, man. They don't know any stock. Probably jolly with the CEO. Orleman bought any stock.

I mean, you know, I think Neil won a little bit to make a point, but throughout the history this, none of these board members have been buying stock. It's, I mean, I see it all the time in the biotech world. It's a pension for them. It's a pension. And, yeah, they don't want to, like, drive it to the ground. They'd rather be successful. But if they burp in the boardroom, they're going to get cutout.

So they're just not going to burp and they're going to collect their pension. And, you know, shareholders be damned. Ryan Finn, look, I should also note, Vindel has published several letters. If you're inopportune, if you're interested in learning more, if you're interested, But I won't say it on the podcast, but they've published several letters. The Fendell email is on the bottom of the lenders. You should reach out to them if you want to talk about it. Or if you've got questions, if you're considering one or the other, you should reach out

and discuss it because, you know, this is a staggered board. The director you choose now is going to be serving for the next three years. So you should weigh your boat very, very carefully. And Brian, you only run a handful of stocks, but we've got an embarrassing amount of overlap. I'm not going to mention any because then we'd have to disclose longer short. but I know if you've got 12, I know eight of them very well and three of them pretty well. So we're going to have to have you back on again with a much shorter gap between appearances than the last time. Perfect. Thank you, guys.

A quick disclaimer. Nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.