IMH IPO - Where's My Checkbook?
I had not thought about IMH and its combination of the IMH management company and the IHM Secured Loan Fund lately.  But earlier this week I checked IMH's website and it looks like the consolidation has been approved, and on October 28, 2010, IMH filed a pre-IPO S-11.  I guess IMH and investors in the IMH Secured Loan Fund figured out the senior management compensation issues enough to get the consolidation approved (there are lawsuits filed so the saga is not over).   I always felt that the whole compensation argument was like arguing over carpet and wallpaper on the Titanic. 

I am not going to read the whole S-11, but will cherry-pick a few highlights.  These comments are out of context and if you're serious about this investment you should read the entire document. 

• For the first six months of 2010, IMH posted a loss of $45 million, of which $39 million was loss provisions and impairment charges.  The operating loss for the first half of 2010 was approximately $6 million.
• Accumulated losses are $454 million.
• "Substantially all of our commercial mortgages are in default, and currently performing loans may default in the future."  Yikes.
• IMH is using outside consultants to workout its defaulted loans.  I am curious how much these firms or individuals will receive for their workout efforts and how much IMH will net on any asset recovery?
• At June 30, 2010, IMH estimated that it had $15.9 million in cash funding requirements for existing loan commitments.  At June 30, 2010, IHM listed $3.5 million of cash.
• Existing investors only receive partial liquidity on the IPO, and are having their  equity diluted.

IMH has wide latitude in making investments with net IPO proceeds. It does not look like it is going to attempt to save any of its existing loans or assets.  It will be originating new loans and acquiring exisitng loans to take advantage of the real estate upheaval and aftermath of the credit crisis.

My question with IMH has always been its valuation for exisitng assets.  It still lists nearly $300 million in total assets, about half its asset value at the end of 2007.  I estimate that IMH has lowered valuations about 50%.  Is this enough?  I don't know, but my gut tells me it is not.   Land values have dropped considerably, and more than 50%, especially in the location and in the pre-development space where IHM operated.    The market's appetite for this IPO will tell us whether IMH was accurate in its asset valuation.

I never thought that IHM Secured Loan investors had much of choice but to approve the consolidation.  Snark aside, I hope this investment works out for investors.