Is the 11.0 Rocket shares per Mr. Cooper share exchange rate fair relative to the intrinsic values of both companies?

Short answer:

With the information currently available in the news release, we cannot definitively say whether an exchange of 11 Rocket Shares for every 1 Mr Cooper Share is “fair” from a pure‑valuation standpoint. The news piece simply announces that former Louisiana Attorney General Charles C. Foti Jr. and the law firm Kahn Swick & Foti, LLC (KSF) are examining the adequacy of the price and the transaction process. No explicit valuation data (e.g., current share prices, market‑cap figures, discounted‑cash‑flow analyses, comparable‑company multiples, or synergy estimates) are provided in the press release, so a rigorous, data‑driven determination of fairness cannot be made from the news item alone.

Below is a comprehensive framework you can use to assess the fairness of the 11‑to‑1 exchange ratio, along with the types of data you would need and the analytical steps you should take.

1. What “Fair” Means in a M&A Context

Only after quantifying these elements can you decide whether 11 Rocket shares per Mr Cooper share represents an equitable exchange.

2. Data Required to Evaluate the 11‑to‑1 Ratio

3. How to Compute the Implied Value of the Offer

1. Determine the per‑share value of Rocket
   
   [
   \text{Value per Rocket share} = \text{Current market price of Rocket (RKT)} \times \text{Number of Rocket shares received per COOP share}
   ]
   Example (illustrative):

   • If RKT trades at \$30 per share, the implied value per Mr Cooper share in the transaction is 11 × \$30 = \$330.

2. Compare to Mr Cooper’s current market price

   • If COOP is trading at \$200 per share, the premium = ((\$330 - \$200) / \$200 = 65\%) premium.
     
   • If COOP trades at \$350 per share, the offer would be at a discount.

3. Adjust for market‑wide multiples

   • Compute Enterprise Value (EV) for each company:
     [ EV{\text{COOP}} = \text{Market cap} + \text{Debt} - \text{Cash} \ EV{\text{RKT}} = \text{Market cap} + \text{Debt} - \text{Cash} ]
   • Compute EV/EBITDA for each. If Rocket’s EV/EBITDA is significantly higher (i.e., it trades at a premium relative to its earnings), the exchange ratio may be fairer for COOP shareholders. Conversely, if Rocket is cheaper, the exchange could be over‑valued for the target.

4. Incorporate synergies

   • Assume a $X million synergy that is split 50‑50 after the merger. Add half of that synergy value to the target’s intrinsic valuation when calculating the fair premium.

5. Sensitivity analysis

   • Because the deal is all‑stock, simulate a range of Rocket share price outcomes (e.g., ±15 % from today’s price) to see the distribution of possible outcomes for Mr Cooper shareholders. A high‑volatility stock can create a wide swing in effective value.

4. What the News Suggests About the Deal’s “Fairness”

• Investigative focus: The fact that Kahn Swick & Foti (KSF) is investigating the adequacy of price and process implies that some stakeholders (perhaps the former attorney general or investors) suspect that the exchange rate may not be fully reflective of the intrinsic value. This does not automatically mean it is unfair, but it signals potential concerns about either:

1. Inadequate valuation (e.g., the 11‑share exchange may undervalue Mr Cooper’s assets, earnings, or growth prospects.
2. Process issues (e.g., lack of sufficient shareholder communication, insufficient independent review, or potential conflicts of interest).

• Regulatory perspective: When a former AG is involved, the investigation could be driven by concerns about fiduciary duty of the Board of Mr Cooper. A fair transaction in the legal sense generally requires reasonable, informed, and independent assessment of valuation and alternatives.

• Potential red flags to watch:

| Concern | What to look for in the underlying data |
|--------|----------------------------------------|
| Price‑to‑earnings premium | Is the implied premium within the typical range (e.g., 20‑40 % for similar sector M&A) or is it significantly higher or lower? |
| Valuation gap | If the implied value per Mr Cooper share (using current Rocket price) is far below Mr Cooper’s intrinsic value (e.g., based on DCF), there could be a “short‑price” concern. |
| Stock price volatility | A high‑volatility Rocket share price could result in “over‑payment” if Rocket’s price falls after the deal is announced. |
| Synergy estimate | Are there credible, disclosed synergy figures that justify a high premium? |
| Deal structure | Are there protective clauses (e.g., “cash‑top‑up”, “price protection”, “lock‑up” terms) that protect Mr Cooper shareholders from downside? |

5. Practical Steps to Answer the Question with Real Data

1. Obtain the latest market prices for RKT and COOP on 2025‑08‑06 (the date of the news release). Use a reputable source (Bloomberg, Reuters, or the exchange’s official data).
   
2. Calculate the implied COOP price: ( 11 \times \text{RKT price}).
   
3. Compare:
   
   • Current COOP market price vs. implied price.
     
   • Calculate the premium or discount.
     
4. Collect key financial metrics for both firms (EBITDA, Net income, Debt/Equity, free‑cash‑flow) from their latest 10‑K or 10‑Q filings.
   
5. Compute EV/EBITDA and P/E for both companies. Determine if the exchange ratio aligns with the relative valuation ratios (i.e., is the target’s EV/EBITDA roughly similar after the 11‑share conversion?).
   
6. Perform a DCF (or use analyst estimates) to estimate intrinsic value per share for COOP and for Rocket. Compare the intrinsic value of the 11‑share package against the DCF result for a COOP share.
   
7. Adjust for estimated synergies (if publicly disclosed, otherwise use industry averages – e.g., 2–5 % of combined revenue) and re‑calculate the “fair” premium.
   
8. Sensitivity analysis: Model scenarios where the Rocket share price moves ±10 % and ±20 % from current to gauge risk.
   

If the implied price after steps 1‑3 is within 20‑40 % premium to the current COOP price, and relative multiples and DCF analyses also support a comparable valuation (or a reasonable premium for synergies), you can argue that the 11‑share ratio is fairly priced. If the implied price is much lower (or if the ratio yields a discount or a premium that is far above the industry average without clear synergy justification), the ratio may **not be fair, supporting KSF's concerns.

6. Bottom‑Line Verdict (Based on Available News)

• No quantitative verdict can be drawn solely from the press‑release. The article tells us “investigating” the price, not that the price is proven to be unfair.
  
• To assess fairness you need:
  • Current RKT and COOP share prices on the announcement date.
    
  • Financial metrics for both companies.
    
  • Synergy estimates (or lack thereof).
    
  • A valuation model (DCF or comparable multiples).
    

Therefore: With the limited information provided in the news article, we cannot confirm whether the 11.0 Rocket‑share‑per‑Mr Cooper‑share exchange rate is fair. An accurate answer requires additional market data, financial statements, and a valuation analysis that takes into account the current market prices, relative multiples, expected synergies, and any deal‑specific protections.

7. Suggested Next Steps for an Investor or Analyst

1. Gather the required data (prices, financials, synergies).
   
2. Perform the valuation steps outlined above.
   
3. Compare the implied value to the intrinsic value and examine the premium in context of industry norms.
   
4. Review the transaction documents for any price‑adjustment provisions (e.g., a “collar” or “price‑floor”) that could mitigate volatility risk.
   
5. If the analysis shows a significant shortfall, consider engaging with the board, filing a shareholder vote (if required), or monitoring for potential regulatory or legal actions that may be prompted by KSF’s investigation.

By following this approach you can move from a qualitative suspicion (the investigation) to a quantitative, data‑driven assessment of whether the 11‑to‑1 exchange is truly “fair” for Mr Cooper shareholders.