Amigo Holdings Just Got Even More Crazily Fun10 Mar 2020 14:35
https://seekingalpha.com/article/4330689-amigo-holdings-just-got-even-crazily-fun
Summary
The founder and majority shareholder of Amigo Holdings is a willing seller as we've known for a few weeks now.
It gets better - his current insistence is that the company should all three of cease lending, recoup all advances and sue the regulator.
It's hard to see where, in the absence of a Hail Mary bid, this doesn't go to zero.
The basic Amigo Holdings (TCPK:AMHLF) problem
As I said a few months back the basic problem for Amigo is that there's a significant risk of their business model being regulated out of existence. For those who don't think this is even possible we should recall that this is what happened to Wonga, exactly what has happened to payday lending itself in a number of US states. Interest caps and other regulations mean the business simply cannot exist.
How likely this is to happen is the risk to the stock?
The intervention
The founder of the business got himself re-elected to the board and then said that, as the majority (over 60%) shareholder, he was open to being bought out. This is not known as a great upside for a stock.
The latest
That founding and majority shareholder has now come back again with his full point, something that has led to another drop in the stock:
Amigo
(Amigo Holdings share price from London Stock Exchange)
The core of his argument is here from him in a Medium post.
To paraphrase. The company lent money on certain conditions and making certain checks on ability to repay. They thought these met the regulations of the time. The regulator is now stating that this isn't good enough. And if the regulator says that about all future lending then that's fine, the regulator is correct.
However, the claim is at least that the regulator is demanding that all previous lending be retrospectively changed.
This has horrible implications for the company:
In spring 2019, the FOS had a meeting with senior Amigo executives and informed them that they had changed their stance on irresponsible lending, and that Amigo should too. Previously, a commitment to a feasible budget plan based on a combination of verified and self certified data was sufficient. Now, irrespective of the budget plan, any indication that the customer had been living beyond their means (or might do in the future) became a reason to retrospectively refund all interest payments as far back as 2010. Loans to customers with no credit problems, but who had an overdraft or a credit card which had not been cleared in full at the end of each month, became ‘irresponsible’ loans- as did loans to virtually everyone else. Later the FOS issued figures showing that, true to their word, they did actually uphold 90% of all complaints relating to guarantor-backed loans in 2019.
Their future business disappearing has one implication - the future of the business is dead. But all of their past income being declared refundable has ano
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