ABR

Arbor Realty ($ABR) CEO Snaps Up 210,000 Shares for $1.94M Amid Plunging Stock and DOJ Probe

05/22/2025 21:29

Arbor Realty Trust ($ABR) CEO Ivan Kaufman has made a significant vote of confidence in his company by purchasing approximately 210,000 shares over three consecutive days as the stock price plunged to near 52-week lows. The cluster purchase, worth approximately $1.94 million, occurred between May 20-22, 2025, with Kaufman buying 10,000 shares at $9.98 ($99,800) on May 20, followed by 140,000 shares at $9.43 ($1,320,200) on May 21, and 60,000 shares at $8.70 ($522,000) on May 22. Notably, these purchases came as ABR's stock approached its 52-week low. The share price has fallen more than 35% from its October 2024 high of $14.275 to below $9, with a year-to-date decline of approximately 31%. Particularly sharp drops occurred in late February and early April 2025. This substantial insider buying takes place against a backdrop of significant financial challenges for Arbor Realty. The company reported a 25.1% year-over-year revenue decline to $240.69 million in Q1 2025, while earnings per share plummeted 66% to $0.16 from $0.47 a year earlier. Additionally, the company recently cut its quarterly dividend by 30% to $0.30 per share. Beyond the performance issues, Arbor Realty faced regulatory scrutiny in July 2024 when Bloomberg reported that the U.S. Department of Justice was investigating the company's loan practices. Short sellers had raised concerns about a distressed loan portfolio, causing shares to drop over 19% at that time. Currently, approximately 30% of the company's float remains shorted. Despite these headwinds, Kaufman has steadily increased his position over the past few days, purchasing at progressively lower prices—a pattern often interpreted as a strong signal of an insider's belief in the company's value. The transactions were executed pursuant to a Rule 10b5-1 trading plan, indicating they were pre-planned rather than reactive to short-term price movements. Arbor Realty Trust operates as a mortgage real estate investment trust (REIT) specializing in structured finance assets across the U.S. multifamily and commercial real estate markets. The company operates through two primary business segments: Structured Business and Agency Business. Financially, Arbor maintains approximately $310 million in cash and generates trailing twelve-month operating cash flow of $352.11 million. However, the company carries a concerning debt-to-equity ratio of 319%. Recently, Arbor closed a $1.15 billion repurchase facility to unwind two collateralized loan obligation vehicles, aiming to reduce leverage and improve liquidity by approximately $80 million. Generally, substantial insider purchases, particularly by a CEO, signal a belief that shares are trading below their intrinsic value. In ABR's case, the stock's valuation metrics—including a P/E ratio of 8.66-8.82 and a price-to-book ratio of 0.74—indeed suggest undervaluation. Investors should weigh this insider confidence against the company's challenges, however. The high debt ratio, revenue declines, DOJ investigation, and general headwinds facing mortgage REITs all remain risk factors. Macroeconomic uncertainties, including U.S.-China trade tensions, could place additional pressure on real estate finance markets. Prior to Kaufman's recent transactions, other Arbor insiders had also purchased shares during periods of weakness. Director William C. Green acquired 10,719 shares in September 2024 and 5,269 shares in December 2024, while CCO David Erwin Friedman purchased shares in June and September 2024. Ultimately, Kaufman's substantial buying represents a strong signal of his confidence in Arbor Realty's long-term value and recovery potential despite current difficulties. Investors should approach with caution, however, considering the near-term challenges and industry risks. Upcoming earnings releases, resolution of the DOJ investigation, and management's execution on deleveraging strategies will be critical indicators of the company's recovery trajectory.

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