Category: Company News

As questions have swirled about the viability and motivation behind Eddie Lampert’s $5.2 billion purchase of Sears of out bankruptcy, one notion has been constant: his offer is the only one that would save 45,000 jobs.

Now, even that tenet has been thrust into question. Sears’ unsecured creditors took to the U.S. Bankruptcy Court for the Southern District of New York in White Plains on Monday to protest Lampert’s bid for Sears. In cross-examinations of Sears’ financial advisor, Lazard’s Brandon Aebersold, and board member William Transier, the unsecured creditors’ legal counsel dug into the uncertainty that persists around Sears’ ability to grant continued employment.

Lampert, Sears’ chairman, is purchasing Sears through an affiliate of his hedge fund ESL Investments. As part of the proposed deal, Lampert has said he is aiming to buy 425 stores, which equates to roughly 45,000 jobs. But the exact stores Lampert will continue to operate, and thereby the official number, has not been formalized. Lampert has until May to do so.

Meantime, Sears, which also operates Kmart stores, plans to close more stores in 2019 and beyond, a point its unsecured creditors raised in court.

Akin Gump’s Joseph Sorkin, legal counsel to the unsecured creditors, asked Lazard’s Aebersold how many stores the company plans on closing in 2019. When Aebersold responded that he did not know, Sorkin followed up about the number of jobs that could be impacted.

“Do you know how many employees will lose their jobs over the course of 2019 as a result of the plans ESL has?” he asked. Aebersold likewise did not know the impact on jobs.

Lampert’s bid, and its ability to save jobs, has become a touchpoint.

In a letter addressed to Lampert, Democratic presidential candidate Sen. Elizabeth Warren recently wrote: “I am concerned that under your leadership, Sears may continue to struggle and employees will continue to face uncertainty and anxiety over their future employment, and ongoing risks to their benefits and economic security.”

Meantime, workers rights group Rise Up Retail has been leading rallies of current and former Sears workers to advocate for the protections of workers following Sears’ bankruptcy.

Sears declined to comment.

WATCH:Sears was the Amazon of the 1930s. Here’s where the retailer is today

As questions have swirled about the viability and motivation behind Eddie Lampert’s $5.2 billion planned purchase of Sears out of bankruptcy, one notion has been constant: his offer is the only one that would save 45,000 jobs.

Now, even that tenet has been thrust into question. Sears’ unsecured creditors took to the U.S. Bankruptcy Court for the Southern District of New York in White Plains on Monday to protest Lampert’s bid for Sears. In cross-examinations of Sears’ financial advisor, Lazard’s Brandon Aebersold, and board member William Transier, the unsecured creditors’ legal counsel dug into the uncertainty that persists around Sears’ ability to grant continued employment.

Lampert, Sears’ chairman, is purchasing Sears through an affiliate of his hedge fund ESL Investments. As part of the proposed deal, Lampert has said he is aiming to buy 425 stores, which equates to roughly 45,000 jobs. But the exact stores Lampert will continue to operate, and thereby the official number, has not been formalized. Lampert has until May to do so.

Meantime, Sears, which also operates Kmart stores, plans to close more stores in 2019 and beyond, a point its unsecured creditors raised in court.

Akin Gump’s Joseph Sorkin, legal counsel to the unsecured creditors, asked Lazard’s Aebersold how many stores the company plans on closing in 2019. When Aebersold responded that he did not know, Sorkin followed up about the number of jobs that could be impacted.

“Do you know how many employees will lose their jobs over the course of 2019 as a result of the plans ESL has?” he asked. Aebersold likewise did not know the impact on jobs.

Lampert’s bid, and its ability to save jobs, has become a touchpoint, in part because the new company faces significant challenges. Under Lampert’s guidance the company hasn’t turned a profit since 2010. Its competitors, like Walmart and Target, are bigger and better funded than Sears, allowing them to make investments in technology and stores that Sears cannot match.

Sears’ unsecured creditors have, therefore, questioned whether Lampert’s push to resurrect Sears is driven by an achievable business plan, or “nothing but the final fulfillment of a years long scheme to rob Sears and its creditors of assets and employees of jobs while lining Lampert’s and ESL’s own pockets.”

The unsecured creditors have accused Lampert of using his unique position as Sears’ longtime chairman, CEO and largest shareholder to orchestrate deals that unduly benefited him. Those deals include Sears’ spinoff of Lands’ End in 2014 and transactions with Seritage Growth Properties, a real estate investment trust Lampert created through some Sears’ properties a year later.

Their cause has seemingly resonated. In a letter addressed to Lampert, Democratic presidential candidate Sen. Elizabeth Warren recently wrote: “I am concerned that under your leadership, Sears may continue to struggle and employees will continue to face uncertainty and anxiety over their future employment, and ongoing risks to their benefits and economic security.”

Meantime, workers rights group Rise Up Retail has been leading rallies of current and former Sears workers to advocate for the protections of workers following Sears’ bankruptcy.

Despite questions about the magnitude of jobs Lampert’s bid would save, the judge overseeing the case, Judge Robert Drain, has indicated support for an offer that could still save any number of jobs. Drain twice granted ESL and Sears more time in order to craft a resolution when it seemed like they had reached a breaking point.

That apparent proclivity was another point underlined by lawyers representing Sears’ unsecured creditors on Monday. A lawyer with their legal team referred to minutes from a meeting with the judge after which Sears had rejected ESL’s offer. According to the minutes, Drain encouraged Sears and ESL to make one more attempt to get past the finish line.

Drain, meantime, seemed at some points to have run out of patience with the lawyers for the unsecured creditors. At one occasion, Drain admonished counsel for the unsecured creditors for having “spent 20 minutes going over stuff that is unnecessary.”

When lawyers informed Drain that a new potential point of contention between Sears and ESL arose Sunday night over who would assume $166 million in liabilities, Drain reminded the parties they have already signed a legal contract.

A spokesperson for Sears declined to comment.

WATCH:Sears was the Amazon of the 1930s. Here’s where the retailer is today

A Democratic proposal that would limit stock buybacks takes dead aim at one of the market’s main pillars of support for the past decade.

The trillions spent on share repurchases since the current bull market began in March 2009 have helped keep a floor under Wall Street even when times got bad. Last year was not a very good one for the market, with the S&P 500 down more than 6 percent, but companies’ willingness to step in and buy their stock likely kept the damage from being even worse.

However, the issue has been a hot one, particularly among progressives who believe companies should be doing more with their cash than rewarding shareholders and putting money in the pockets of executives who ultimately benefit by higher stock prices.

That sentiment helped fuel a measure being proposed Sens. Charles Schumer of New York and Bernie Sanders of Vermont who said in a New York Times op-ed that they want to apply “preconditions” on buybacks that would force $15 an hour wages, paid time off and health benefits.

“At a time of huge income and wealth inequality, Americans should be outraged that these profitable corporations are laying off workers while spending billions of dollars to boost their stock’s value to further enrich the wealthy few,” the senators said.

While the measure seeks to address the wealth gap, Wall Street pros worry about its disruptive potential for markets.

“If the populist attacks become enacted, they will be meaningful,” said David Santschi, director of liquidity research at TrimTabs, which tracks where cash is going in the marketplace. “I don’t think it’s the government’s job to tell companies how they can spend money.”

Buybacks shattered a record in 2018, surging to $1.04 trillion and doubling 2017’s output.

Big tech companies and Wall Street banks are usually the leaders in gross purchases. Apple, for example has executed more than $250 billion in repurchases over the past decade through 2018, according to S&P Dow Jones Indices. Embattled banking titan Wells Fargo did more than $63 billion during the period, while Microsoft surpassed $100 billion.

The top 20 repurchasers alone bought back more than $1.1 trillion in the decade.

Even Warren Buffett‘s Berkshire Hathaway, which almost never participates, announced some $928 million worth in 2018.

“That’s a lot of moves that have a lot of buying power,” Santschi said. “If you have a significant slowdown in buybacks, it would have a significant impact on markets.”

The buybacks have worked hand in glove with Federal Reserve monetary policy, which has kept interest rates at borrowing-friendly lows and for years pumped in trillions of liquidity to markets through an aggressive bond-buying program that pushed the central bank’s balance sheet to $4.5 trillion.

With the Fed on the sidelines and buybacks under attack, that could set up an even more challenging circumstances for investors, who survived a downturn last year that briefly skated into bear market territory.

To be sure, Schumer and Sanders, the latter of whom is likely a Democratic presidential contender in the 2020 race, will have a hard time getting their plan approved. While the House is in their party’s hands and likely to be more receptive, the Senate remains Republican and President Donald Trump likely would have misgivings over a plan that would strike so directly against Wall Street.

“This is what I’d call the opening round in terms of what’s going on,” said Doug Roberts, managing principal at Channel Capital Research. “I don’t think it’s going to make it’s way through the Senate.”

In fact, Roberts said, there could be some positives: If the ultimate result is getting companies to invest more money in their businesses and personnel, it could provide an economic boost particularly along with Trump’s focus on discouraging companies from building abroad.

“That seems like a Goldilocks effect,” he said. “On a technical level, [the buybacks restrictions] may restrict them a little bit. But it also may be offset with an economic effect.”

Goldman Sachs star beverage and tobacco analyst Judy Hong was hoping to do some early research into the multibillion-dollar cannabis industry — that is, until she was stopped by the investment bank’s firewall blocking certain content.

Among the companies the 20-year Goldman veteran tried to review was KushCo Holdings, a California-based business that sells packaging, containers and other supportive products to the world’s largest cannabis producers. And though no part of KushCo’s business actually touches a marijuana or hemp plant, Hong found herself nonetheless barred from the company’s website, said a KushCo executive familiar with the matter.

Bank of America Merrill Lynch’s consumer analyst is also researching KushCo and the space, the person added. Both Goldman Sachs and Bank of America Merrill Lynch declined to comment about their plans for future marijuana-related research coverage. The KushCo executive said it’s fielded calls and met with representatives of both banks.

Wall Street is discovering a unique set of hurdles as it explores the possibilities in cannabis. Those hurdles are in the form of lending restrictions, disagreeing local laws and their own internal company firewalls as banks rush to cover that new and growing market. It is a market that could one day be worth $150 billion globally when including the different derivative products like CBD-infused beverages, according to Tilray CEO Brendan Kennedy. Tilray is a medical marijuana grower based in British Columbia.

Other challenges for Wall Street include the flurry of federal regulations that currently deter banks from working with legal dispensaries in the U.S. and mandate that banks and other financial firms file “suspicious activity reports” to help monitor money laundering. Others have brought the just-say-no attitude to Wall Street, steering clear of any services related to the marijuana business for fear of federal prosecution.

Martin Landry, a Canadian equity analyst at GMP Securities, told CNBC that his first interaction with the cannabis industry came in 2013 when his firm helped Canopy Growth conduct a round of private financing. Canada became the first Group of Seven country to approve recreational use of pot when Ottawa passed legislation in October.

“I was covering consumer and some pharma names and [my company] asked if I would look at the sector. And I said ‘no,’” Landry said Friday.

The analyst explained that he shied away at first for fear that the other consumer and pharmaceutical companies under his coverage wouldn’t take him as seriously and that the new venture could damage his existing reputation. It was later that he eventually decided to explore coverage on Canopy, Cronos Group and other industry names.

But for those willing to take a chance, the cannabis industry could represent a sizable revenue stream. Some experts, such as Cowen’s Vivien Azer, see the U.S. marijuana market growing to $80 billion by 2030. The up-and-coming market has attracted investments from a range of people and companies looking for the help of big banks. That is a group including venture capitalist Peter Thiel and the globe’s largest alcohol companies looking for a strategic partnership.

Azer is one of just three analysts from a major brokerage covering the space currently.

Goldman acted as financial advisor to $32 billion Constellation Brands last year when the Corona beer owner increased its investment in Canadian marijuana producer Canopy Growth. Bank of America Merrill Lynch, meanwhile, provided committed financing for Constellation’s $4 billion bet on the weed company.

“The global cannabis market presents a significant growth opportunity and Canopy Growth is well-positioned to establish a strong leadership position in this fast-evolving category,” outgoing Constellation CEO Rob Sands said in November.

Even traditional tobacco companies have taken note of the powerful uptrend in legal cannabis sales. Marlboro maker Altria said in December that it had agreed to buy a 45 percent stake in leading cannabinoid company Cronos Group for about $1.8 billion.

Such bets have often made lucrative, albeit volatile, investments. The stock price of medical marijuana giant Tilray is up more than 250 percent over the last six months, while rival Canopy Growth is up 86 percent. The ETFMG Alternative Harvest ETF — which tracks the stock performance of companies that are engaged in the legal cultivation of cannabis — is up 40 percent in 2019 alone.

Analysts “have to decide if it’s value added,” said Pat Hearns, director of research at Longbow Research. Though Longbow does not cover cannabis, Hearns said any sell-side analyst must ask themselves a number of questions before launching coverage. Some things to consider: is there an appetite for such research and if the analyst has any background knowledge that would lend unique insight.

But ultimately, the decision over whether to cover a basket of equities comes down to profit and whether a group of equities is under-covered, Hearns said.

“That’s usually the case with an emerging industry. That could be true with cannabis,” he added. “I don’t think coverage of cannabis — it won’t be a moral issue — but [rather]: can you be one of the first to provide some real insights and understand the regulatory backdrop.”

Longbow does not cover cannabis because the brokerage is still too small to cover an additional industry, Hearns said. Starting marijuana or hemp coverage “would mean pulling someone from supporting another industry vertical, which I can’t do at this time without sacrificing some productivity” elsewhere, he wrote.

Meanwhile many analysts will likely keep their eyes on federal legislation and announcements from the U.S. Justice Department.

The recent U.S. farm bill removed hemp from the federal government’s list of controlled substances, a move many in Canadian and American corporate suites believe sparked interest in CBD, cannabidiol. Some who infuse products with CBD claim it can be used to ease a wide range of medical ailments, including epilepsy and arthritis.

Marijuana remains illegal on a federal level in the United States, but 10 states and the District of Columbia have allowed its use for either medical or recreational purposes. Michigan became one of the latest to OK marijuana in November.

Senate Democrats’ proposal to limit stock buybacks is their latest jab at the Republican tax cuts and part of an ongoing effort to paint themselves as the better party for the working class as the 2020 election cycle starts.

Senate Minority Leader Chuck Schumer, D-N.Y., and Sen. Bernie Sanders, I-Vt., have proposed a measure to stop corporations from repurchasing shares until they first invest in workers and communities through better pay and benefits. In a New York Times column published Sunday, the lawmakers argued the plan would help to boost wages and reduce income inequality

The senators’ proposal fits a Democratic Party intent on knocking the GOP as too cozy with corporations, rather than workers, during pivotal elections next year. With the op-ed, Schumer and Sanders try to discredit the 2017 Republican tax overhaul, the signature GOP economic achievement of President Donald Trump’s first term in office.

The Senate Democratic leader Schumer’s coordination with Sanders, a self-described Democratic socialist who caucuses with Democrats, also reflects the groundswell of discontent with corporations and the wealthy within the party base. The proposal is only the latest from Democrats since the new Congress started last month to try to create more equality between workers and their employers. For example, both Schumer and House Speaker Nancy Pelosi, D-Ca., endorsed a bill to raise the U.S. minimum wage to $15 per hour.

“So, in this Congress, the two of us will attempt to get a vote on legislation that demands that corporations commit to addressing the needs of their workers and communities before the interests of their wealthy stockholders,” Schumer and Sanders wrote of the proposal to limit share buybacks.

“The time is long overdue for us to create an economy that works for all Americans, not just the people on top. Our legislation will be an important step in that direction,” they conclude in the Times column.

Democrats control the House, but Republicans hold both the Senate and the White House. The plan proposed by Schumer and Sanders likely will not get through the GOP-controlled Senate or earn Trump’s support. McConnell’s office did not have an immediate response to the proposal.

Kevin Hassett, the chairman of Trump’s Council of Economic Advisors, told CNBC on Monday that he wishes “some economist would go and talk to these guys about how buybacks work.”

Despite the legislative hurdles for the plan, Democrats will use it to try to gain an advantage in the 2020 messaging battle. The party hopes to hold its House majority, defeat Trump and gain a Senate majority in next year’s elections. Trump, who has poor approval ratings, has at least one factor buoying his re-election bid: a solid economy.

With their plan targeting buybacks, Democrats take aim at Trump’s main economic achievement: the law that slashed tax rates for corporations and trimmed them for most individuals. The tax plan chopped the corporate rate to 21 percent from 35 percent. Republicans who designed the legislation argued it would boost capital investment, worker productivity, wages and economic growth. Trump called it a “middle class miracle.”

Democrats have cast the plan as a giveaway to corporations and wealthy Americans. They have consistently pointed to the record $1.1 trillion in stock buybacks in 2018, mechanisms to boost share prices unlocked in part by the corporate tax savings.

Schumer and Sanders say the share repurchases have not helped workers. They wrote Sunday: “First, stock buybacks don’t benefit the vast majority of Americans. That’s because large stockholders tend to be wealthier. Nearly 85 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households.”

Trump has frequently touted the economy as his greatest achievement in office. He will likely do so again Tuesday during his State of the Union address.

The dueling narratives will figure prominently in the 2020 election, in no small part because the tax law gave Democrats something to criticize within an otherwise strong economy. Democrats “have the stronger case at this point” in arguing the plan led to more stock buybacks and boosted the wealthy, said Bill Galston, a senior fellow in governance studies at the Brookings Institution.

Attacks on the tax plan and share buybacks will fit into Democrats’ broader contention that they will do a better job of looking out for the working-class Americans who Trump pledged to defend as a candidate.

“Both parties are going to try to make the argument that they are the real defenders of working class and middle class Americans,” he said. “And no doubt Democratic leaders including the presidential nominee will make the case that the Trump administration began by claiming the mantle of populism and ended by doing the bidding of the plutocrats.”

The share buyback proposal also reflects a shift in the Democratic Party’s center of gravity. The 2008 financial crisis and a perception that the wealthy people responsible for it avoided punishment fueled a more populist bent in both major political parties.

The change helped to propel Sanders, a vocal critic of banks and major corporations, to a surprisingly strong showing in the 2016 Democratic presidential primary. He could run again in a 2020 Democratic primary dominated in the early going by discussions about whether and how to tax the wealthy more.

Galston expects Trump’s eventual Democratic opponent to champion policies designed to boost the working class and rein in corporations.

“I would be very surprised if the Democratic presidential nominee, whether leaning left or leaning center, did not campaign on the transition to a $15 minimum wage and other issues that have become kind of common ground,” he said.

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The proposal by Senate Minority Leader Chuck Schumer and Sen. Bernie Sanders to limit stock buybacks is the latest jab at the Republican tax cuts and part of an ongoing effort to paint themselves as the better party for the working class as the 2020 presidential election cycle starts.

Schumer, D-N.Y., and Sanders, I-Vt., have proposed a measure to stop corporations from repurchasing shares until they first invest in workers and communities through better pay and benefits. In a New York Times column published Sunday, the lawmakers argued the plan would help to boost wages and reduce income inequality

The senators’ proposal fits a Democratic Party intent on knocking the GOP as too cozy with corporations, rather than helping workers. With the op-ed, Schumer and Sanders try to discredit the 2017 Republican tax overhaul, the signature GOP economic achievement of President Donald Trump’s first term in office.

The Senate Democratic leader’s coordination with Sanders, a self-described Democratic socialist who caucuses with Democrats, also reflects the groundswell of discontent with corporations and the wealthy within the party base. The proposal is only the latest from Democrats since the new Congress started last month to try to create more equality between workers and their employers. For example, Schumer and House Speaker Nancy Pelosi, D-Calif., endorsed a bill to raise the U.S. minimum wage to $15 per hour.

“So, in this Congress, the two of us will attempt to get a vote on legislation that demands that corporations commit to addressing the needs of their workers and communities before the interests of their wealthy stockholders,” Schumer and Sanders wrote of the proposal to limit share buybacks.

“The time is long overdue for us to create an economy that works for all Americans, not just the people on top. Our legislation will be an important step in that direction,” they conclude in the Times column.

Democrats control the House, but Republicans hold both the Senate and the White House. The plan proposed by Schumer and Sanders likely will not get through the GOP-controlled Senate or earn Trump’s support. Senate Majority Leader Mitch McConnell’s office did not have an immediate response to the proposal.

Kevin Hassett, chairman of Trump’s Council of Economic Advisors, told CNBC on Monday that he wishes “some economist would go and talk to these guys about how buybacks work.”

Despite the legislative hurdles for the plan, Democrats will use it to try to gain an advantage in the 2020 messaging battle. The party hopes to hold its House majority, defeat Trump and gain a Senate majority in next year’s elections. Trump, who has poor approval ratings, has at least one factor buoying his re-election bid: a solid economy.

With their plan targeting buybacks, Democrats take aim at Trump’s main economic achievement: the law that slashed tax rates for corporations and trimmed them for most individuals. The tax plan chopped the corporate rate to 21 percent from 35 percent. Republicans who designed the legislation argued it would boost capital investment, worker productivity, wages and economic growth. Trump called it a “middle class miracle.”

Democrats have cast the plan as a giveaway to corporations and wealthy Americans. They have consistently pointed to the record $1.1 trillion in stock buybacks in 2018, mechanisms to boost share prices unlocked in part by the corporate tax savings.

Schumer and Sanders say the share repurchases have not helped workers. “First, stock buybacks don’t benefit the vast majority of Americans. That’s because large stockholders tend to be wealthier. Nearly 85 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households,” they wrote.

Trump has frequently touted the economy as his greatest achievement in office. He will likely do so again Tuesday during his State of the Union address.

The dueling narratives will figure prominently in the 2020 election, in no small part because the tax law gave Democrats something to criticize within an otherwise strong economy. Democrats “have the stronger case at this point” in arguing the plan led to more stock buybacks and boosted the wealthy, said Bill Galston, a senior fellow in governance studies at the Brookings Institution.

Attacks on the tax plan and share buybacks will fit into Democrats’ broader contention that they will do a better job of looking out for the working-class Americans who Trump pledged to defend as a candidate.

“Both parties are going to try to make the argument that they are the real defenders of working class and middle class Americans,” Galston said. “And no doubt Democratic leaders including the presidential nominee will make the case that the Trump administration began by claiming the mantle of populism and ended by doing the bidding of the plutocrats.”

The share buyback proposal also reflects a shift in the Democratic Party’s center of gravity. The 2008 financial crisis and a perception that the wealthy people responsible for it avoided punishment fueled a more populist bent in both major political parties.

The change helped to propel Sanders, a vocal critic of banks and major corporations, to a surprisingly strong showing in the 2016 Democratic presidential primary. He could run again in a 2020 Democratic primary dominated in the early going by discussions about whether and how to tax the wealthy more.

Galston expects Trump’s eventual Democratic opponent to champion policies designed to boost the working class and rein in corporations.

“I would be very surprised if the Democratic presidential nominee, whether leaning left or leaning center, did not campaign on the transition to a $15 minimum wage and other issues that have become kind of common ground,” he said.

Subscribe to CNBC on YouTube.

Slack confidentially filed to go public, according to a press release published Monday.

Slack, a provider of chat and direct messaging services for businesses, is one of a number of tech IPOs expected in 2019, including Uber, Lyft and Airbnb. The company hired Goldman Sachs to lead its initial public offering as an underwriter, Reuters reported in December, saying Slack was seeking a valuation of over $10 billion in its IPO. Slack has raised about $1 billion so far, according to Crunchbase.

Slack is planning to pursue a direct listing, sources told The Wall Street Journal, according to a report from last month. If Slack follows through with the direct listing, that would make it the second big technology company to do so, according to The Journal, following Spotify’s lead.

Slack reportedly has plenty of cash on hand to pursue the direct listing route. According to The Information, Slack had about $900 million in cash on its balance sheet as of October 2018. For the year ended in January 2018, Slack had revenue of $221 million, The Information reported based on early 2018 documents.

Here is the full release from Slack:

Slack Technologies, Inc. today announced that it has confidentially submitted a draft registration statement on Form S-1 with the Securities and Exchange Commission (the “SEC”) relating to the proposed public listing of its Class A common stock. The public listing is expected to take place after the SEC completes its review process, subject to market and other conditions.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities. Any offers, solicitations or offers to buy, or any sales of securities will be made in accordance with the registration requirements of the Securities Act of 1933, as amended (“Securities Act”). This announcement is being issued in accordance with Rule 135 under the Securities Act.

Watch: Wide variation between potential tech IPOs in 2019, says The Information’s Jessica Lessin

Homeowners today are sitting on a record amount of equity, thanks to the recent run-up in home prices, but a lot of them can’t access that cash. They don’t have the credit scores to qualify for a home equity loan or a cash-out refinance.

Enter EasyKnock, a barely 2-year-old company that will give you cash for your home and then let you stay on as a renter for up to five years. At anytime during that lease, you can buy your home back. At the end of the lease, you choose if you want to stay or go.

“EasyKnock is a company that is allowing people to access equity in their home that have been shut out by the traditional lending market,” said Jarred Kessler, CEO of EasyKnock. “Around 23 percent of the housing market has built up equity in their home and they can’t release it. That’s due to FICO score, about 15 million small-business owners who have been shut out by the credit markets, or people who have missed a credit card payment or mortgage payment.”

EasyKnock’s model is not, however, a traditional investor purchase. The company gives the homeowner about 70 percent of the appraised value of the home. This protects EasyKnock from any depreciation in the home over the term of the lease and simultaneously gives the homeowner a future stake in any appreciation in the home’s value. That is because at the end of the lease term the former homeowner must either buy the home back or sell it to someone else. If they choose to have EasyKnock sell, they get the full value of the sale, including appreciation, minus the 70 percent EasyKnock paid and minus a 1.5 percent commission on the final sale price.

EasyKnock makes money through monthly rent, which is negotiated as part of the sale, and through the extra fees tied to the purchase and to the inevitable sale of the home to someone else at the end of the lease term. Since it is not a lender, it does not need to consider FICO credit scores. Kessler said once the lease is up, the tenant has to decide whether or not to sell to a third party or buy the home back.

“We are not in the business of continuing to own homes,” he added.

So far the company has bought about 100 homes in five southern states, but with a recent infusion of $3.5 million in seed money and $100 million in debt financing from investors, Kessler said he expects to expand to approximately 500 housing markets in more than 35 states and 2,000 homes this year alone. Investors include Montage Ventures, Crestar Partners and Blumberg Capital, according to the company.

Chris Driskell adores his lakeside family home in Gainesville, Georgia. He has lived there all his life. But Driskell needed cash for his own real estate business and couldn’t access any through the banks, despite having plenty of equity in his home.

“If my credit score was a few more points, or you know, I made the banker happy that day, I probably would have made more money, but that’s not the way the world works,” said Driskell, who sold his home to EasyKnock and is now renting it. “They came down, appraised the house, it was a very simple process that took about 30 days, and I got a check for what I needed, and they paid off the existing mortgage that I had. I signed a two-year lease with them with the option to repurchase the house within that two years.”

For Driskell, it was the right option at the right time. If he cannot buy the home back, however, and has to sell to someone else who doesn’t want to be a landlord, he could lose his family home.

“The house does have sentimental value to me. My parents grew up, my parents lived on the property, I grew up here, so yes it would sting a little bit,” he said.

The single-family rental market is very strong and competitive now, so it is likely Driskell could find another investor and stay on as a renter. Regardless, he got the money he needed and no longer has to worry about other expenses.

As the owner, EasyKnock pays property taxes, insurance and maintenance on the home. For now, it is contracting the maintenance part of the business out but as it has grown, executives there say they expect to bring that rental management in-house.