Data Dive

Data Dive: Buying, Selling And Foreclosing

Summer 2018 is running down its final weeks. The heat is still going full speed ahead in most of the U.S., but stores are beginning to stock their festive fall wear, and the early marketing materials for pumpkin spice are beginning to rear their orange letters at scattered locations around the country.

But in case anyone was wondering whether payment or commerce might decide to sit out the last stretch of summer – perhaps to decamp to the beach – last week gave us all an answer.

Nope.

Instead, it was a hot week – in terms other than the temperatures – with the potential for some big buys, big sales and (for at least one player) some big trouble.

MoviePass’ Ending: Going Private

Triton Funds, the venture fund, will reportedly soon make an offer on MoviePass’ owner, Helios and Matheson Analytics. The deal would see the venture fund taking over control of the increasingly cash-strapped firm.

MarketWatch, citing comments from Triton’s co-founders, reported that the student-run fund believes the subscription model is actually a solid innovation that isn’t going away anytime soon – and that the low share price offers an opportunity.

The fund’s co-founders — Nathan Yee, Sam Yaffa and Yash Thukral — told MarketWatch that the company was mismanaged and that it should be taken private. Yaffa told MarketWatch that they had approached Helios and Matheson last week with an offer on their firm – and the three-million-subscriber movie subscription service.

By Friday, they were told that Helios and Matheson wasn’t interested, so the plan is now to take the offer to shareholders directly.

“We are deciding on our final valuation, and then we will reach out to the shareholders of HMNY,” Yaffa said, referring to Helios and Matheson by its ticker symbol. They declined to say whether they had a stake in the company at the current time.

Helios and Matheson has had a rocky summer so far, that has seen the MoviePass service endure a blackout when the firm ran out of cash to pay suppliers. In July, it was reported that HMNY arranged a short-term $6 million loan from Hudson Bay Capital Management, $5 million of which will go toward paying its partners.

Helios and Matheson had announced an intended stock stale to boost its cash reserves; proceeds from a stock sale must first go to paying back the loan, reported Bloomberg.

If the company doesn’t pay the money back, it faces a 15 percent annualized penalty until it does so. If the payment is 48 hours late, the interest could jump to 130 percent, the report noted.

Helios and Matheson have also announced it will institute a reverse stock split of its issued and outstanding common stock.

Meanwhile, MoviePass customers were busy on social media this weekend, protesting the latest unexpected change to the site. Before the app reportedly crashed entirely, the service limited consumers to purchasing tickets to just two movies: the new Mission: Impossible movie or Slender Man, a horror movie. And the showtimes, particularly for Mission: Impossible, were highly restricted.

During an interview, MoviePass CEO Mitch Lowe told Digiday that the move was likely temporary, and was undertaken to save the app money. He also noted that the movie selection may change on a daily basis.

“Unfortunately, in order to stay financially stable, we’ve had to curtail the service,” Lowe said. “We had to right the ship as far as the amount of money we were burning.”

Is Elan Going Up On the Block?

As Friday closed out, the rumor mill kicked into high gear with reports that U.S. Bank will sell its card processing service, Elan. According to the report, Finastra, FIS and Fiserv are in the running to acquire the unit from U.S. Bank.

Elan processes cards for 1,800 banks in the U.S., providing payment services, credit card issuing, debit card processing and prepaid card and ATM services. It also provides support for more than 34,000 ATMs around the U.S. and more than 13 million ATMs and debit cards.

Finastra, FIS and Fiserv declined to comment, and neither U.S. Bank nor Elan have offered any official word.

While FIS hasn’t been acquisitive in recent months, is has been beefing up its payment services. It has landed key contracts that include its deal with Fifth Third Bank, which chose it for real-time payments, reported FinTech Futures, which noted that an Elan acquisition could greatly enhance that effort.

Last year, Fiserv acquired Dovetail, a payments software company, noted the reports.

For its part, U.S. Bank has been looking to expand and improve its services through Elan. Last October, in partnership with Ondot Systems, the bank rolled out the enhanced My Mobile Money app so that it now offers two-way fraud alerts for Elan-processed debit cards.

“Our financial institution clients are always looking for new ways to provide their debit cardholders with fraud prevention options,” said Troy Cullen, president of Elan, at the time. “By working with Ondot to provide a mobile fraud alert service, we are empowering consumers to keep an eye on their card activity, whether they are shopping at their local grocery store or reviewing their transactions.”

And speaking of reviewing transactions…

Wells Fargo: The Saga Continues

Well, one has to say this much for Wells Fargo: They go big or they go home when it comes to making extremely public errors. And they almost never go home.

This week’s contribution to the bad news: The embattled national bank disclosed in a Securities and Exchange Commission (SEC) filing that hundreds of individuals saw their homes in foreclosure because of a glitch in a software the company used.

Oops.

According to a report in CNN citing Wells Fargo, the company’s software denied mortgage modification requests incorrectly. The glitch affected some accounts that were in the foreclosure process between April of 2010 and October of 2015. The bank has now set aside $8 million to compensate the customers who were impacted by the computer glitch. The issue was corrected in October of 2015.

As a result of the computer error, around 625 customers were denied a loan modification or weren’t offered one although they qualified for it. In around 400 of the cases, the homeowners lost their homes to foreclosure.

The new filing came as Wells had just agreed to pay $2.09 billion in penalties to settle claims related to mortgage loans that the lender processed before the last recession.

In that case, Wells Fargo was accused of starting up an initiative to double its production of sub-prime and Alt-A loans. Despite being aware that many substantial portions of its loans contained false income data, Wells Fargo failed to disclose this information.

In addition, the lender screened out many of these loans from its own portfolio and limited its liability to third parties for the accuracy of its stated income loans. Wells Fargo went on to sell at least 73,539 stated income loans between 2005 to 2007. Nearly half of those loans have defaulted, resulting in billions of dollars in losses to investors.

So, what did we learn this week?

There is a price for everything: movie subscriptions (though finding the right price is apparently quite hard), processing networks and making a series of trust-damaging errors where your customers are concerned.

See you next week.

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