Black Knight inventory sinks after FTC lawsuit report

Black Knight’s stock price plunged over 3.5% on Monday, after a Politico report stated that the Federal Trade Commission will file a lawsuit seeking to halt the transaction with Intercontinental Exchange.

Talk that the federal agency was eyeing the deal closely picked up in recent weeks, especially as reports broke that Black Knight hired Truist to broker a potential divestiture of its Empower loan origination system.

The sale was either part of a consent decree with the FTC or as a legal defense to a lawsuit, much in the same way UnitedHealth and Change Healthcare beat a similar case by proposing the sale of an asset, Keefe, Bruyette & Woods analyst Ryan Tomasello wrote after the Truist news came to light. 

Meanwhile, ICE Mortgage Technology’s leadership is changing effective on March 1, as Timothy Bowler, the president of ICE Benchmark Administration replaces Joe Tyrrell, who headed the unit from the time Intercontinental Exchange acquired Ellie Mae in September 2020.

Deal opponents celebrated the report, which stated the FTC is planning to file its suit sometime in March.

“If the FTC takes action, it will reflect the collective pushback from academics, policy experts and industry leaders throughout the mortgage finance sector,” said a statement from David Stevens, CEO of Mountain Lake Consulting and the former CEO of the Mortgage Bankers Association, who also served as the Federal Housing Commissioner in the Obama Administration.

The Community Home Lenders of America, an organization of small- and mid-sized mortgage bankers also applauded the possibility of a legal filing.

“The FTC blocking the ICE purchase of Black Knight would be a victory for consumers and mortgage lenders alike, who would both benefit by preserving more competition for mortgage software services and by making it harder to impose anticompetitive practices like tying,” said CHLA Executive Director Scott Olson in a statement.

Those against the transaction are worried about ICE Mortgage Technology controlling the entire process, from application to servicing and secondary marketing, through ownership of the most widely used software in each area. They often add that a sale of Empower would not alleviate those concerns.

Black Knight closed trading on Monday at $60.85 per share, down $2.23 from Friday. That is a far cry from the $85 per share cash and stock offer from Intercontinental Exchange when the deal was announced in May 2022.

Over 2.9 million Black Knight shares were traded on Monday, well above its average volume of 872,401, according to Yahoo Finance.

Intercontinental Exchange also closed lower, at $101.51 per share, down $1 or 0.98% from Friday. The company had no comment about the FTC report.

Black Knight and the FTC did not return a request for comment.

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