Findell Capital 的 Brian Finn 谈 Oportun $OPRT

You're about to listen to the yet another value podcast with your host me, Andrew Walker. Today's episode is episode 320, I think. I can't believe we're already up to 320. I have Brian Finn back on from Dindell Capital. Brian's been on—I believe this is his 4th time. He hasn't been on in a couple of years. He owns about 10% of Oportun Financial; the ticker is OPRT.

He's running a proxy fight, and we came on to discuss why he's running it, what upside he sees, and all of that. Obviously, he's very incentivized because he owns about 10% of the company, so you should keep that disclosure in mind. You should do your own work. See our full disclaimer at the end of the episode. I think it's a really interesting thing. We talk about corporate governance, what the upside is, improving operations, and all sorts of things. Hopefully, you enjoy this episode.

We're going to get to the episode episode 320. But first, a word from our sponsor. Today's podcast is sponsored by DOUPA. 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 timeconuming, and it's a terrible use of your time. Dupa changes that. They automate your model updates with near real-time precision using AI that's been trained on thousands of companies filings across every sector. The result, you get a fully updated model in your format with your logic faster than ever before. Every KPI, every footnote, every guidance figure exactly where you need it with source links built in. So stop wasting times on data entry and start focusing on what really matters, analysis, insights, and alpha generation. Dupa doesn't just save your time, it gives you time back where it matters most. Book a demo with the DUPA team today at dupa.com/demo. That's dupa d a l o pa.comdemo. 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's either for the 3rd or 4th time, but it's been a long time—Brian Finn from Dindell Capital. Brian, how's it going?

Good. Thank you for having us on, Andrew.

I’m super excited to have you back on. Before we get started, a quick disclaimer: Nothing on this podcast is investing advice. There's a full disclaimer at the end of the episode, and you can listen to that. I'll also add, Brian, that we're talking about Oportun 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, and extra reason to do your own work. Think for yourself. Nobody's trying to form a group or anything here.

With all that out of the way, Brian, I'd love to toss it over to you. We did 2 podcasts way back in the day on Oportun. For listeners who haven't been listening to me for 4 years, I'd love to quickly talk to you about what Oportun is, why they're so interesting, and then we can maybe dive into the proxy fight.

Sure. Oportun is a lending company. They make small unsecured loans to underbanked people, and they've had a target demographic of Hispanics. They've got kiosks in stores, and a lot of their materials are in Spanish, so they meet these people where they are in their communities.

They've got an incredible lending franchise that has really gotten messed up and destroyed by a management team and a board controlled by legacy board members, none of whom have any lending experience, who thought to try to turn this very simple gem of a lending business into a fintech empire. Starting when they went public, they started trying to add all of these other verticals, and they layered on all these costs. You saw a very simple business become very convoluted from a cost perspective and from a focus perspective.

I think we began our conversations 2 years ago. We've been involved in the company since March of 2023. When we first talked, we talked about putting out a public letter, which we did, calling for this company to massively reduce its opex and refocus on the core business.

We've been involved in the saga. The stock has worked; it's gone from 3 to 7. 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 prevent the CEO, Raul, from having imperial control over the board and the company, given his long history of making lots of strategic and operational mistakes.

I'm laughing because you and I are recording this on June 12, and this morning the lead independent director, who is retiring, published a letter. 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 want to be like, “You've been on the board since the beginning of time—since the mid-2000s, when this was formed—and the stock is down 50% over that time. There have been massive write-offs and huge losses.” I'm not trying to lay it at any one person's feet, but it's hard to say, “All these people are so committed,” or that this is perfect and there's no need for improvement here, when you've got this track record. If that makes sense.

No, I mean, it's incredible. You've got these 6 legacy board members. All of their tenure TSRs are negative: negative 75% for Jinny Lee and Sandra Smith, and negative 60% for Joan Barefoot, Neil Williams, Luis Marantes, and Raul.

Then the guys that we brought on—Rich Timbore and Scott Parker—have positive TSRs. Scott Parker is up 190% since he joined the board, and Rich Timbore is up 150%. So it's clear that independent directors who have lending experience can drive a different outcome for this company.

The fact that this board is defending its track record is incredible. They should have at least some humility to recognize that the company got way off-kilter and that it was really only brought back to the focus of what it should have been focused on—the core lending business—after we began pushing them and embarrassing them a bit through our public letters and our entreaties.

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. Frankly, there are just lots of obvious things that can be done, even from an outsider's perspective, from someone like ourselves who doesn't necessarily have the lending experience but can see how the overall cost structure had gotten here.

I was just going over and trying to formulate a response to what these guys put out. 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 2023. It's a complete false retelling of history here because, if you look at their conference calls, in November 2022 Raul says, “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 opex, 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 opex had gone up several times. So it's very clear from an outsider's perspective that these guys had massively bloated the cost structure here, and them getting religion on cost in early 2023 was very marginal.

In early 2023, 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. That's why we pushed for a much more aggressive cost reduction that March, and they pushed back on it. They didn't react all that quickly.

That's why the company did eventually start taking out costs, but it just took them a while, and they had to massively dilute shareholders here. It's just been like pulling teeth getting these guys to do the right thing on the expense side, on the governance side, and on the operational side in general.

It really wasn't until our directors came on the board in early 2024 that we started to see a lot of these operating metrics normalize and become more in line with some of their competitors. When Scott Parker got on the board, you saw opex per loan get cut in half, in part due to his efforts to identify the right cost structure they needed.

What did they do? What did this board do? 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 was planning on running for election in the upcoming term. This is but another example of this company, with this bloated board of legacy directors, entrenching themselves.

Let me just jump in there, Brian. I've got so many questions. I want to talk about the business and everything. But look, I've been a semi-student of corporate governance recently, and one thing I thought they did that was interesting was kick Scott Parker off.

If you look at what they filed, one of the nice things about an activist fight is that the company files a proxy that has the background of everything they've interacted with. When I read their background while preparing for this podcast—and I'm by no means an expert in this—2 things jumped out at me. They say, “Hey, Dindell Capital asked us, ‘10 board members is too many.’” They asked us to shrink the board.

Then, a couple of days later, Scott Parker—the guy you put on, who, to my knowledge, is pretty much the only director here under whose directorship the stock has been positive—meets with you and discusses everything. A month later, as this activist fight gets ready, they shrink the board from 10 to 8 and say, “We're giving Dindell what they want, from 10 to 8.” And, by the way, the director that Brian put on is 1 of the ones who's resigning as they shrink from 10 to 8.

When I read that, it was a little weird to me, and I was wondering: Did this director, who's had a positive experience, resign because he didn't want to be on the board? What was the background there? I'd love to 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. He'd been on the board for a year, and this was going to be his first opportunity to run for election, be voted on by shareholders, and have shareholders vote on his tenure.

This was a defensive measure by this board. You have a board that's currently 10 people: 6 of whom are legacy members and 4 of whom are new independent members, 2 of whom we brought on and 2 of whom were brought on through a search firm in early 2024. So, you've got 4 people there who are going to basically act in the interest of shareholders and 6 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. Until the board dynamics change, until you have an even number of legacy and independent directors, the legacy directors can dictate things.

Neil Williams had told us that he was planning on stepping down, so that takes the board from 10 to 9. We asked them to reduce the board by 1 further person, by 1 of the other legacy directors, none of whom will have lending experience and who've overseen massive shareholder destruction.

We've spoken to some of these directors. We've spoken to Jenny Lee several times on calls, and she is just completely clueless about this business. She appears to us to be completely clueless about this business. She's a deer in headlights, so she really has no business being on this board at all.

She and the other directors have been on the board for, in some cases, over a decade. In subsequent votes, they've not received a lot of shareholder support. Jenny Lee would not have been reelected to this board had we not had a cooperation agreement with the company.

In Joan Barefoot's case, she had more “withhold” votes than “for” votes, which, under normal corporate governance rules, would deny her a board seat. But under Oportun's governance rules at the time, she was allowed to keep her board seat. In Sander Smith's case, it was basically tied between “withhold” and “for” votes.

So, you have a board of legacy directors who, from 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.

Getting rid of a very competent board member like Scott, who has real lending experience and has been the CFO of 3 publicly traded companies, including OMF, which is the best-in-class competitor in this space, is a survival tactic for them. Shrinking the board and getting rid of a very competent guy like that does nothing to help shareholders. It does nothing to help keep management accountable.

They did this at a time when the company does not have a permanent CFO, and this is a guy who's been the CFO of 3 publicly traded companies. We've gotten lots of feedback from other shareholders that this was a very egregious action that they took.

We hope that shareholders appreciate that and vote to put Warren on the board, so that this board 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 Raul and a bunch of legacy directors that he is friends with and who he has long histories with.

That's the purpose of this. If I can jump in, it reminds me of—do you know the hot-dog meme where it's the guy in the hot-dog suit and he's saying, “We're all trying to find the guy who did this”? If you've seen the video, it's because a hot-dog truck drove through a store.

A lot of this reminds me of that. The pushback on you reminds me of, “We're all trying to find the guy who did this.” Look, this company, in the late 2010s, really focused on growth, and expenses got out of hand. It's like, “Yeah, they made a mistake, but we're really turning around now.”

It's like, hey, legacy board members and CEO, you're all trying to find the guy who did this. You were in charge when all of these mistakes that you're criticizing and saying are insane happened in the past.

I want to talk about the financing. You were in charge when the company got so over its skis that last year they had to dilute shareholders by 10% of the equity with penny warrants in order to get a 15% term loan. You were in charge. That falls at your feet.

It's kind of crazy to me that they're out here saying, “Hey, there's no change needed. This board is so engaged, so sharp, so on top of things.” I'm not saying that any 10% shareholder should be given 100% of the board, but it's kind of crazy to me that 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 just wants to replace the board.” 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 look at the beneficial ownership table in a proxy. You see all these directors who've been around for 10 years, and they're getting paid $55,000 a year in cash and $100,000 a year in stock options.

You look at their beneficial ownership, and their actual stock ownership is maybe 2x what they're getting paid in cash. If you had just let all those options vest and held onto the stock, you've never come out of your pocket on this.

You're 75, you're 70, you don't have any other public directorships. This is your retirement pension. You're not here to create value. You're here to go to 1 board meeting a month and collect a paycheck.

I've rambled a lot. I want to talk about Oportun's business in a second, but I'll just turn it over to you. If there's anything I rambled on about that you want to comment on, please go ahead.

No, I think, as an outsider who's just reading the proxy—and I don't know if you're a shareholder or not—you hit the nail on the head. This is all very obvious stuff to somebody who's just looking at this from the outside in, just as it was obvious to us 2 years ago when we got engaged and saw what was happening.

This isn't rocket science. Every shareholder and stakeholder that we've talked to gets it. They get what's happening here. They get that these are people trying to protect their self-interest.

They're going to use their resources. They can spend a lot of money on a proxy advisor, and they can spend a lot of money on lawyers. They can 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. The facts are just blatantly clear here: how the business was under their stewardship, how it's changed with our entreaties, and how it's changed even further by having board members here who have lending experience.

We didn't want to be in a proxy fight. Proxy fights are not fun. It's a big suck on time, a big suck on energy, and it's a stressful thing to have to do—to have to engage with a company like this.

When we went to them, we went to them with a very simple request. We basically said, “Hey, look, you have a board. It's a huge board. It's 10 people on a small-cap company—not quite a micro-cap company, but a small-cap company.”

At the very least, you need to have some board members who have lending experience in positions of board leadership, either as the lead director or as the head of certain committees.

You've got a bunch of clueless—and I apologize for saying this—woodchucks, little woodchucks, who are these board members. They don't have any experience in lending, and they don't even have particularly impressive résumés from our perspective.

I guess I apologize for using that pejorative. Maybe I won’t call them woodchucks, but these are people with not a lot of experience. We just went to them and asked, “Hey, look, can you guys put some people with lending experience in positions of power?” They wouldn’t do that. They flat-out refused.

Then it was like, “Hey, why don’t you guys reduce the board from 10 to 8?” What did they do? They had 1 guy already retiring, Neil Williams, and they kicked off the guy with the most lending experience, who had been the CFO of 3 publicly traded companies. It was just an enormous slap in the face.

Yeah. Crazy. You have your largest shareholder, and you put a director on the board. Maybe 1 director isn’t responsible for everything, but the company finally starts getting its feet under it. The stock’s working, things are turning around, and then you kick him off the board. It’s crazy to me.

But let me switch tracks. I wanted to have you on because I’ve been on this corporate-governance kick, too, and I wanted to support somebody who I think owns a lot of the company and is fighting the good fight here. But you said it earlier: You’re doing this at a higher level than me.

Engaging with a company takes time, energy, and frustration. You’re running a proxy fight, and it’s costly. Most of my listeners are here because they want to hear smart value investors talk about stock ideas, so I want to ask you about Oportun. You run Vandell and file a 13F that people can go look at. It’s not a handful of companies; it’s 2 handfuls of companies that you own, right?

I want to ask you: As we’re sitting here today, why is this an opportunity? Why is this an opportunity worth investing in, or even worth taking all this time and energy to change the board? I think a lot of people are going to look at it and say, “Hey, you’ve got a subprime lender trading for a little bit under book value once you account for these penny-warrant dilutions and stuff. What’s the point? What’s the alpha? Why are we really fighting here? What are we playing for?”

No, that’s a good question. The answer is because there’s enormous upside if this company is operated optimally. In general, we think the company can perform better regardless because of some of the macro tailwinds. Their interest costs are coming down, their net charge-offs are coming down, and with the help of Scott and Rich, they’ve been able to bend the curve on the net-charge-off side.

But let me take a step back and try to explain this business from a unit-economics perspective. When we initially started engaging with these guys, we really tried to have them focus on the unit economics. Forget about all these crazy metrics they were using, like adjusted EBITDA. I said, “No, look, you have a lending business. You’ve got to think about it like a lending business.”

For a small consumer-lending company, you really have 4 line items. You’ve got the interest rate you’re charging—your financing fee, your interest income. You’ve got the money it costs to run the business, the opex ratio; the money it costs to borrow to give the loans; and your net charge-offs. The first amount, after deducting the other 3 amounts, needs to be 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.

What was interesting about our engagement here is that when we initially started to address the company this way, the lead director, Neil Williams, really had no idea what the opex ratio was. He had no idea what some of these metrics were. You’d think the lead director would have all of this 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 that they were a big adjusted-EBITDA grower, and it’s like, no, you’ve got to focus on ROA.

The ROA of this business, if run correctly, could be 8% to 10%. If you take that and apply it to a roughly $3 billion loan book—their loan book is a little bit lower than that at the moment, but $3 billion is where they were a year or 2 ago—then 10% of $3 billion is $300 million worth of pre-tax income. This is a company right now with a fully diluted market cap a little bit above that.

Let me pause you there. So that’s approximately 8% to 10%? You were mentioning—you said it’s pre-tax ROA, right? When I read that, 2 things jumped out at me. An 8% to 10% ROA, even if it’s pre-tax, is high for a lending business. It’s really high.

I’m not super aware of companies that are securitizing and doing 8% to 10% ROAs on lending businesses. I’m sure they’re out there, but it’s very high. As a spot check on that, OneMain reports return on assets. Theirs is after-tax, not pre-tax, but when I look at OneMain, I think they reported ROA so far in 2024 of around 2%. It’s generally trended around 3%. They did hit 6% in 2021, but I look at that and say, “Okay, adjusted for taxes, you’re talking about the high 3% to low 4% range.”

So what is it about Oportun that can let them do 8% to 10% pre-tax ROA? It just seems very high to me.

They have this very interesting niche and moat where they’re appealing to a group that they’ve got a ton of data on: underbanked Hispanics. This is a pretty unique demographic in that they often speak a different language, and they’re not familiar with normal credit institutions.

As a cohort, they actually overperform. They tend to do much better when it comes to paying back loans than other cohorts that are similarly in a more distressed situation. I don’t know if that’s due to cultural factors or what, but they generally don’t want to carry a lot of debt. When they get a loan, they tend to pay it back.

They’re in this incredible niche where they’ve really got the perfect consumer to appeal to. They meet the consumer where they are, and they’ve got this growing demographic. I could spend a lot of time waxing about why it’s a great group and a great customer base.

They’re able to charge 1,000 basis points more than OMF. I think OMF is in the mid-20s; these guys can charge in the mid-30s. One of the things we’re arguing for is that they should get rid of their interest-rate cap and go a little bit higher than 36%.

If you look at this group, their alternative to using Oportun is to go to a payday lender. What Oportun represents is a way for these people to establish a credit score at a pretty reasonable rate relative to the alternative options. You can do this a couple of times, and then you can end up getting a credit card or becoming 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 opex ratio. OMF is at around a 7% opex ratio, and Oportun has been as high as 20%. They need to reduce that, and the net charge-offs got too high.

This is a business that could do net charge-offs of 8% to 10%, and they’ve gotten as high as 12%, 13%, or 14%. Where we think there’s an opportunity here, and how we get to that 8% to 10% number, is you remove the interest-rate cap and you’re able to charge an extra 250 basis points in APR.

If I can just—on the interest-rate cap, I think it speaks highly to your due diligence that you spotted that and thought through it. I don’t think there’s anyone who listens to an investing podcast who’s going to argue against, “Look, interest-rate caps sound nice. We’re not going to charge our people more than 36%.”

It’s the same with rent controls and things like that: It creates all sorts of knock-on issues. Especially here, as you said, you go to a payday lender and you can get a 100% interest rate, while these guys are capping themselves at 36%. If there’s nothing in between, that’s a huge issue, because there are loans you could profitably make and that people would take at 50%, and you’re rejecting them.

It impacts your ability to profit and grow. It’s just so silly. I love that you were pointing this out and pointing out how crazy it was, because it’s a silly policy, in my opinion. I don’t know why a bank—maybe JPMorgan would have it because they’re worried regulators are going to shut them down and impact their entire franchise—but a small-cap company imposing a 36% cap on itself? I’m no expert in consumer lending, but it seemed silly to me.

I thought it spoke really well to your due diligence to point this out and explain how crazy it was.

Yeah. In Oportun’s own materials, they lay out the cost to borrow $1,500 through the different channels.

So, an online-only payday lender costs you $3,500 to borrow $1,500. Installment lending is $1,000. Oportun is at $500.

Yep. So, you're talking about going from $500 to maybe $530, $540, or $550, and that opens up a whole other spectrum of borrowers here. You're getting more margin, so it's a win for the customers and a win for you.

I'm not saying that all of their loans need to go above 36%. You don't hit them with 40%, but you shouldn't be turning down people who you could profitably 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 about that in 2 ways. First, I'd love to talk securitization. The company just did a big securitization—this is June 5—they did a $440 million securitization at a 5.67% annual yield. Really great securitization so far this year. I'd love to talk about what the securitization market is telling you about their loans, their business, and all that sort of stuff. Then I have a harder question on the October financing.

Yeah, I mean, it's heartening to see that their cost of financing has come down here. I think that was a real risk in the darker days a year and a half ago: What if the financing markets freeze up for them, given the sort of situation that they were in?

Through having the experience of Rich and Scott on the board, and Carlos as well, they've been able to get better deals with these different lending facilities, and the cost of financing has come down a lot. That's 200 basis points over their prior financing, and you apply that out over, again, a $3 billion loan book. That's a fair amount of margin there.

This was a $500 million deal. So, a $500 million deal at a 2% spread—that's $10 million in interest-rate savings. It's financing a sixth of their book. For a $250 million–$300 million market-cap company, $10 million on this is big—huge.

That's why I think our point here is that I think the business is going to work regardless going forward, due to the changes that we've advocated for and the presence of some people now who have lending experience. Our concern, though, is the long-term existential risk of having the legacy board members essentially give Raul imperial powers. They've shown no ability to provide oversight to him, and Raul, obviously left to his own devices, can't seem to help himself and makes lots of what I consider strategic and operational decisions.

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

Let me ask: On the one hand, I see the ABS financings getting better and better. They have access to the securitization market. I'd love to talk about the financing in October. This is the financing from October 29, 2024, for people who are listening. They did a big financing with Neuberger and Castlelake—a big term loan at a 15% interest rate—and alongside that, they had to give the lenders basically 10% of the company in penny warrants to get this term loan.

I see, on the one hand, a company with full access to the ABS markets, improving interest rates, and all that sort of stuff. On the other hand, I see a company that, last October, had to do one of the more distressed financings I've seen—hugely dilutive. I think it speaks poorly of a lot. If I were voting for the board of directors, that financing alone would be: “Hey, you really got over your skis. You've got a lot of explaining to do.”

I'd love to speak about what happened with that October financing scheme that led to it and why you don't think it's reflective of the business as it is. If I said, “Hey, this business needs to pay 15% plus 10% of the company in penny warrants,” you'd say, “This is a business that's in true distress. It's not a great business.” So, I'd love to talk about what happened there and why you don't think it's reflective of the business as it is.

I guess to start, I'm just pulling up a slide here. These guys had to do a financing in Q1 of 2023, and they kind of did a good job of disguising it. This was to Neuberger and also involved warrants and dilution, and they needed to basically take out that financing through a new financing.

I do think that it was a great deal for Neuberger and Castlelake, and the loan is being quickly paid down. The company's in a much, much better position today. It's terrible that you have a management team that's had to do these types of financing deals. It's great, obviously, for the creditors, but it just shows the degree to which 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.

The good news is that the term loan should hopefully be paid off or refinanced at a much lower rate over the next couple of quarters. Then the company will be able to produce a ton of cash going forward as they get to that mid- to high-single-digit ROA.

One thing—I almost wanted to throw my computer out the window. I'm looking at the slide right now. It's slide 5 of the October deck, and they say, “Hey, great news on this financing. Our current term loan was 17%, and we're going to be paying about 15% on this term loan.”

I almost wanted to throw my computer out the window. 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.

When I've seen people do this, in my mind, that's a company that thinks its stock is funny money. 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.

Yeah, I just think it speaks to the positioning and the motivation of these legacy board members and of Raul: “This is a nice gravy train. We're just going to keep riding it.” That's what we believe their position has been, not, “Let's try to drive this to the highest possible ROA.”

Again, it's getting there because of some of these changes that we've made. But there's just such an enormous upside here if we believe you really increase the oversight and have more capable, competent people driving the direction from above.

As you guys talk, again, if anybody's looking at this, you need to look at the book value and adjust for the penny warrants that they issued. 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 GAAP earnings might be a little bit lower, but let's say $1.50. That gets you to about a $9.50 book value. OneMain trades for about 2 times book. You've laid out reasons why you think the return on assets here might be higher than OneMain.

Would I be crazy if I said, “The upside Brian's kind of playing for in a well-put-together Oportun is $9.50 in book value 12 months out, trading for approaching 2 times 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 are other ways that either result in a value higher or lower?

No, we believe that's pretty accurate. There are a bunch of different ways you can slice this, but we certainly think that it should be trading above book value. The fact that it's not just speaks to the lack of confidence that folks have in this board and in Raul.

If you had better oversight driving the company here, and you didn't have a bunch of legacy board directors controlling the show, we think there would be a lot more shareholder interest.

When you look at just reading their Q1 results, they say, “Hey, our ROE was 11%. Our adjusted ROE was 21%.” A big piece of that difference is the adjustment for the ABS, which I'm not sure how real or not that is. But either way, when I saw that, I thought, “Oh, you've got a double-digit ROE—let's call it teens on a run-rate basis—and it's trading below book.” One of those 2 things doesn't belong together.

Yeah, it just speaks to people's kind of credulity or incredulity.

I agree. I think we've covered most of my questions. Again, I wanted to talk about the business a little bit, but I've become increasingly disillusioned with this. I'm really happy, even though we don't have a position, to help you lay out the case and drum up some support here.

Anything else we should be talking about on Oportun?

No, look, I didn't mention Warren at all.

Warren is the director Brian is nominating to replace the CEO on the board.

Exactly. Yeah. Warren has an incredible amount of experience in consumer lending. He's a super-senior guy who exists totally independently of Dindell, just as Scott and Rich have existed independently of us. I've never met any of these people. They're just people with great résumés and a lot of experience in the space.

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

You're going to approach this from a first-principles basis. We know this is a great lending business. We know they have a great moat. They've got a great niche, and they serve a great cause. Go in there and do right by shareholders.

If the board members came in there and had entirely different views from mine after seeing it from the inside, then I would defer to them, because I'm not sitting on the board. I'm not privy to a lot of the information that they have. But I think it's so important for boards to be composed of people who have experience in the industry.

It's crazy that Oportun has no one on the legacy board who had any experience in lending. That's your business, so you have to have people who know lending. Lending is a very different type of business from tech, retail, or accounting, which is where all the legacy board members come from, or nonprofit. Lending businesses are valued differently, and they have different risks. You have to have people with lending experience in positions of power on the board, especially in a situation like Oportun, where you had a CEO who went so far off the reservation for a number of years.

You've hit the nail on the head. You've got people with no lending experience, and Oportun got in trouble. What's the scariest thing for an investor? A fast-growing lending business.

In my opinion, that's where you get an empire builder: people without lending experience grow, grow, grow, grow, grow. Oh, gosh—3 years from now, the chickens come home to roost, because that's when a lending business that's growing quickly comes home to roost: when the growth just starts to slow. So I think you identified all the issues there.

Yeah, I appreciate it, and I apologize. I don't mean to use pejoratives on this podcast. I'm sure the legacy directors are all perfectly nice, kind people, and I have nothing against them personally. But I do take issue with their attempts to entrench themselves and with the lack of care they've shown toward their own duties and toward shareholders.

It's the incentive system, man. They don't own any stock. Probably neither CEO bought any stock. I see it all the time in the biotech world. It's a pension for them.

They don't want to drive it into the ground. They'd rather be successful, but if they burp in the boardroom, they're going to get called out. So they're just not going to burp, and they're going to collect their pension, and shareholders be damned.

Brian Finn, look, I should also note that Dindell has published several letters. If you're in Oportun and interested in learning more, they've published several letters. The Dindell email is at the bottom of the letters. You should reach out to them if you want to talk about it or if you've got questions. If you're considering going one way or the other, you should reach out and discuss it, because this is a staggered board, and the director you choose now is going to be serving for the next 3 years. You should weigh your vote very, very carefully.

Brian Finn, 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 whether we're long or short. I know you've got 12; I know 8 of them very well and 3 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 adviser. Thanks.