The Most Dangerous Game

Who Will Survive

A little over a month ago, Hunterbrook launched in dramatic fashion.

In what seems like Bill Ackman’s wildest dream with a sprinkle of Black Mirror absurdism, Hunterbrook is a hedge fund with a media arm. Its team of journalists investigates companies with the goal of uncovering valuable public information, then gives the article to the fund to trade on before ultimately publishing it.

After raising $10M in seed funding during the winter, they recently fired shots at Phoenix Suns owner Mat Ishbia and United Wholesale Mortgage, accusing the company of “a scheme to cheat borrowers”…

Before we get lost in the jungle, let’s look at the facts available on the Hunterbrook operation

The Hounds of

Hunterbrook was founded by Sam Koppelman and Nathaniel Horwitz in 2023

Koppelman is the lead publisher, while Horwitz mans the ship as CEO

Fitzann Reid, a J.D. with 7 years at the SEC, is Chief Compliance Officer.

Other team members include:

• Daniel Sherwood, Senior Investigator and Financial Editor

• Jenny Ahn, Senior Investigator

• Blake Spendley, Investigator

• + correspondents in Peru, Mongolia, Namibia, South Africa, SE Asia, etc

In a New Yorker article, Horwitz claimed that no journalist was making less than a hundred thousand dollars in base salary.

Check out the list of Hunterbrook’s self-proclaimed accomplishments below:

The story I want to take a closer look at is the United Wholesale Mortgage (UWM) fraud allegations.

Suns vs. Cavs

For a while, Mat Ishbia (UWM CEO + Phoenix Suns owner) has been at odds with Dan Gilbert (Rocket Mortgage CEO + Cleveland Cavaliers owner).

Hunterbrook jumped in the middle of the feud after dropping an article titled: “The Lie That Helped America’s Make UWM America’s Largest Mortgage Lender”.

Its contents were just as scathing as the title:

• Alleges that UWM pressured “independent brokers” to push deals their way, which led to $39B in UWM mortgages coming from brokers who sent UWM 99% of their business

• Hunterbrook data analysis claims that borrowers paid UWM billions more in closing costs than people whose brokers found them typical loans

• Litigators say that this conduct could qualify as fraud and a direct violation of laws passed in 2008 to protect borrowers

• For good measure, Hunterbrook filed a class action lawsuit against UWM and filed a whistleblower report to the SEC

While Hunterbrook’s primary contentions were directed at the company, they also took issue with Ishbia personally.

First, the publication argues that shareholders who own $UWMC may have claims stemming from governance issues such as paying CEO Ishbia more than $600M in annual dividends despite a $70M loss and consistently missing SPAC revenue projections. The article states, “Since UWM went public during the SPAC boom in 2021, its market cap has declined by more than $4 billion. During that same period, the Ishbias have taken home a total of at least $2 billion.”

Then, they shed light on a distasteful voicemail from Ishbia to another mortgage exec. The voicemail was about Rocket Mortgage and laced with colorful language.

Finally, they claimed the Phoenix Suns were at risk because Ishbia bought the team using billions of dollars of $UWMC shares as collateral.

Ishbia has since denied all allegations and accused Dan Gilbert of using Hunterbrook as an attack dog.

Now remember how Hunterbrook was founded with the purpose of making trades on the companies they investigated?

Based on Hunterbrook Media’s reporting, Hunterbrook Capital went short $UWMC and long $RKT (Rocket Mortgage).

Check out the results:

The article was published on April 2nd, and $UWMC dropped to a relative low of $6, still above the 52-wk low. They’ve since rebounded to $7.06 which is near the $7.26 price pre-article.

(-2.5%)

$RKT shares have slightly appreciated from $13.17 on April 2nd to $13.85 now.

(+5.2%)

Hunterbrook is a $100M fund according to various reports.

Although $UWMC is slightly down, taking a short position is an expensive endeavor so we do not have an accurate read on Hunterbrook’s true gains / loss.

Nonetheless, the concept at play here is quite interesting and worth tracking

Headlines

• NIVIDIA stock pops 9% after earnings beat. Yahoo Finance article here

• Oaktree takes over Inter Milan after owner missed payment. Reuters article here

• Bumble buys Coatue backed app, Geneva. Techcrunch article here

• Redbird Capital and Weatherford Capital launch college sports fund. SportsProMedia article here