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DOMA Stock: Due Diligence – SEC Filings – Risk Factors

DOMA Stock – What Investors Should Know About Doma Holdings Inc.

DOMA StockDoma Holdings, Inc. provides automated real estate transaction solutions through its underwriting and distribution technology. The company is listed on the NYSE under the DOMA stock ticker symbol. Distribution and Underwriting are its two principal business segments. States Title, North American Title Company (NATC), and North American Title Insurance Company (NATIC) are among the company’s brands. Policies referred through the Company’s direct agents and third-party agents channels are included in the Company’s title insurance underwriting business. DOMA provides solutions for lenders, real estate professionals, title agents, and homeowners.  It allows them to close real estate transactions more efficiently. Doma Intelligence, Doma Title, Doma Escrow, and Doma Close are among the company’s products. Doma Intelligence automatically collects public and private data to power machine learning algorithms, removing the need for manual closing. Its Doma Title product automates the title search process by combining predictive analytics and risk insurance models.

More About DOMA Holdings Inc.

Doma Holdings Inc. originates, underwrites, and provides homeowners, lenders, title agents, and real estate professionals with title, escrow, and settlement services. To this end, the company creates artificial intelligence technology for residential and commercial real estate transactions.  It operates in two divisions: distribution and underwriting. Policies are referred to through the Company’s direct agents and third-party agent channels.  Referrals are then included in the Company’s title insurance underwriting business. The company provides solutions for lenders, real estate professionals, title agents, and homeowners.  Its products allow them to close real estate transactions more efficiently.

  • Distribution – The Distribution segment acquires customer orders and offers title and escrow services for real estate closing transactions. Doma Intelligence, Doma Title, Doma Escrow, and Doma Close are among the company’s products. Doma Intelligence automatically collects public and private data to power machine learning algorithms, removing the need for manual closing. Its Doma Title product automates the title search process by combining predictive analytics and risk insurance models.
  • Underwriting – The Underwriting segment is in charge of insurance underwriting.  This includes policies referred through its direct agents and third-party agents’ channels, and provides services in the areas of residential real estate purchase and refinance transactions. Its third-party title insurance agency business is known as North American Title Company (NATC). States Title, North American Title Company (NATC), and North American Title Insurance Company are among the company’s brands.

DOMA Stock: Annual Reports – Financials – SEC Filings

Doma Holdings, Inc. is incorporated in the state of Delaware. Doma Holdings, Inc is primarily in the business of title insurance. For financial reporting, their fiscal year ends on December 31st. This page includes all SEC registration details and a list of all documents (S-1, Prospectus, Current Reports, 8-K, 10K, Annual Reports) filed by Doma Holdings, Inc.

 DOMA Stock – Risk Factors

The company has a history of net losses

DOMA Holdings has a history of net losses and could continue to incur substantial net losses in the future. In fact, it has incurred net losses on an annual basis since its incorporation in 2016. It lost $12.4 million, $27.1 million, and $35.1 million in net losses for the fiscal years ended December 31, 2018, 2019, and 2020, respectively.  There were $22.9 million and $35.1 million in net losses for the six months that ended June 30, 2020, and 2021, respectively.  The company accumulated a deficit of $44.0 million and $79.1 million as of December 31, 2019, and 2020, respectively.  And, deficits of $66.9 million and $114.2 million as of June 30, 2020, and 2021, respectively, as a result of these losses.

Moreover, DOMA expects to continue incurring significant sales and marketing expenses.  For instance, digital marketing and brand advertising, research and development, and other expenses.  It must expand its sales and marketing efforts to increase the adoption of its title and escrow products.  Continued growth is essential to improve its title and escrow product offerings, and improve customer experience.

DOMA Stock Risks

  • Ongoing expenses – As the company invests, it expects expenses to continue to increase in the near term. However, these investments may not result in increased revenue or growth in business.
  • Managing growth – If the company fails to manage losses or to grow revenue sufficiently, the overall business will be seriously harmed.
  • Expenses as a public company – In addition, as a public company, DOMA will also incur significant additional legal, accounting, and other expenses that it did not incur as a private company. Also, it may encounter unforeseen or unpredictable factors.  This includes unforeseen operating expenses, complications, or delays, which may also result in increased costs.
  • Future Uncertainty – It is difficult to predict the size and growth rate of the market or demand for title and escrow products.  Or, the success of current or potential future competitors. The net losses incurred may fluctuate significantly from period to period.
  • Revenue requirements – The company will need to generate significant additional revenue and maintain gross margins to achieve and sustain profitability. It is possible it will not achieve profitability.  Or, even if it does achieve profitability, it may not remain profitable for any substantial period of time.

Competition in both the Real Estate and Insurance Industries

DOMA’s ability to operate successfully in the highly competitive real estate and insurance industries is critical to its future growth and profitability. The real estate and insurance industries are highly competitive and will most likely remain so for the foreseeable future. The competitors include larger and better-capitalized traditional insurers with significantly longer operating histories.  Also, there are an increasing number of technology companies entering the insurance industry. Some competitors may be more resistant to pricing competition.  Or, they may have the resources to develop competing machine intelligence or reverse engineer certain aspects of DOMA’s technology. Most consumers rely on referrals from real estate agents, lenders, developers, and attorneys when choosing their settlement service vendor and title insurance providers. This is despite having the legal right to choose their own settlement service vendors and title insurance providers.

For these sources of transactions, settlement service vendors and title insurance providers compete fiercely. A significant portion of DOMA’s customer transactions is sourced through Enterprise partners and third-party title agents. Rivals rely on their well-known national brands, reputation, experience, size, financial strength, and ratings. DOMA’s ability to grow its title and escrow business relies on patented technology and machine intelligence-driven title and escrow processes.  These are used to disrupt the way title underwriting has traditionally been conducted and sold.  Maintaining this advantage will be critical to future growth. However, the nature of the real estate and insurance industries is extremely competitive.  As a result, DOMA cannot guarantee that it will continue to compete effectively.  Or, that competitive pressures will not have a material impact on its business.  Or, negatively impact the results of operations or financial condition.

 Doma Holdings has a limited financial history

The company has a short history of operation and a novel business model. This makes assessing its current business performance and growth prospects difficult. Doma Intelligence has experienced rapid growth since its inception in February 2018.  However, it is difficult to assess the current business performance or future prospects. Of course, past performance may not be indicative of, or comparable to future performance. This inability to adequately assess performance and growth could have a significant negative impact on the company brand, business, financial condition, and operating results.

Furthermore, the business model of leveraging machine intelligence technology to facilitate seamless real estate closings is distinctive.  Therefore, there is limited data to validate key aspects of the business model.  For instance, the use of our proprietary data science and machine intelligence algorithms. Title insurance claims can take many years to materialize. As a result, insufficient time has passed since the launch of Doma Intelligence.  There is simply not enough data at scale to validate the model’s performance.

Insiders have substantial control over DOMA Stock

DOMA directors and executive officers, as well as entities affiliated with them, own approximately 57.6% of the outstanding shares of DOMA common stock. As a result, if these stockholders act together, they are able to influence or control matters requiring stockholder approval.  For example, the election of directors and the approval of mergers or other extraordinary transactions. Insiders may also have interests that differ from public shareholders.  If insiders vote in ways that you disagree with, the result may be detrimental to your interests. The concentration of ownership may have the effect of delaying, preventing, or discouraging a change in control.  Thus, depriving stockholders of the opportunity to receive a premium for their common stock as part of a sale.  Ultimately, insiders significantly influence the market price of DOMA stock.

Acquisitions or investments could disrupt the business or harm the financial condition.

DOMA Holdings regularly review and assess strategic alternatives in the ordinary course of business.  This includes potential acquisitions or investments.  Moreover, the company is in active discussions about potential acquisitions and investments from time to time. For example, DOMA completed the North American Title Acquisition in 2019. The company will likely pursue additional acquisitions or investments that can help achieve strategic goals. However, there is no guarantee that such acquisitions or investments will perform as expected.  Or, integrate successfully into the existing business generating significant revenue.  Management may overestimate cash flow, underestimate costs, or misunderstand the risks associated with any investment or acquired business. The process of acquiring a business, product, or technology can also result in unexpected operating difficulties.  These expenditures and other challenges may materialize whether or not the acquisitions are completed.

 Stock in the News

Doma Holdings Inc. Launches Home Equity Financing Solutions to Support Lenders’ Shifting Business (October 2022)

Doma Holdings Inc. announced a home equity financing offer.  It is designed for lenders that will use its Doma Intelligence platform to expedite title searches for home equity loans and home equity lines of credit (HELOC). Doma uses proprietary machine intelligence-powered solutions.  These help lenders who offer home equity financing products expedite the title and escrow process.  In turn, borrowers receive funds faster, with up to 80% of title decisions delivered in minutes. Homeowners are looking to tap into their home equity in today’s rapidly changing market.  This adds fuel to a rapidly growing home equity financing market.

Home equity financing carries lower interest rates than personal loans or credit cards.  Therefore, home repairs, renovations, and debt consolidation are popular uses among home equity financing customers. Doma’s new digital-first home equity financing product enables lenders to quickly originate and convert customers.  This is particularly appealing while macroeconomic conditions are favorable. Doma’s home equity financing customers can now utilize Doma’s innovative technology.  Previously it was enabled for refinance and purchase transactions. These advantages include a shorter time to close, with commitment packages delivered in hours rather than days.  A dedicated service team can assist with fewer missed opportunities and higher customer satisfaction.

DOMA Stock Founder Notifies of Intention to Sell Stock (October 2022)

Maxwell Simkoff intends to sell 246k shares in the next 90 days after lodging an Intent To Sell Form on the 18th of October. If the sale is conducted around the recent share price of US$0.56, it would amount to US$137k.

  • As of December 2020 – Maxwell’s total compensation was 8% salary and 92% other compensation.
    • This indicates that these sales could comprise a meaningful part of his income for the year.
  • Since March 2022 – Maxwell’s direct individual holding has decreased from 48.75m shares to 47.75m.
  • Company insiders –  Insiders have collectively bought US$846k more than they sold, via options and on-market transactions, in the last 12 months.

Doma is Named a Real Estate Technology Industry Leader for Second Consecutive Year (August 2022)

Doma Holdings, Inc. (NYSE: DOMA Stock Ticker) is a leading force for disruptive change in the real estate industry.  The company announced it was named the Overall Real Estate Closing Solution of the Year by PropTech Breakthrough’s 2022 Awards program. The annual program recognizes leaders and innovators in the real estate technology industry.  DOMA Holdings received over 1,500 nominations from across the globe this year.

The PropTech Breakthrough Awards recognize today’s top technology companies, solutions, and products in the real estate technology industry. PropTech Breakthrough is part of the Tech Breakthrough organization, a leading market intelligence and recognition platform for today’s most competitive categories of technology.

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