Inside Thoma Bravo’s $9 Billion Mortgage Market Windfall

... [+]Upon further review, it was deemed a giant mistake.

The return underscores the two dominant trends in the investing world right now. A Central Bank determined to use cheap money to prop up the market and stimulate the economy makes this a time of epic investment windfalls. But they’re surprisingly hard to come by. Active fund managers are struggling to beat the S&P 500 as a handful of soaring tech stocks push the index to new record highs, while most others stagnate or plunge.

Buyout funds saw an obvious mistake. Within days, three firms including Thoma Bravo were knocking on Ellie Mae’s door, inquiring about taking the company private. In October 2019, Ellie Mae paid about $350 million to buy Capsilon, a natural language processing and machine learning startup that could help customers more accurately pull data from voluminous mortgage applications, lowering errors and exceptions. The business filled out an area where Ellie Mae had invested heavily, but not seen great results.

Already a giant cog in the trading of stocks, bonds and derivatives globally, mortgages had long been an area of investment for ICE but where success was still halting. In one fell swoop, it could finance a deal for Thoma Bravo’s portfolio company at record low rates and catapult ICE into an industry lead. While the bet is no sure thing, low mortgage rates and geographic shifts created by the pandemic may give the housing market years of pent up activity for Ellie to service.

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