The Amigo Holdings PLC (LON: AMGO) share price was trading down 5.83% today as investors continue tracking the orderly wind-down of the company, which is set to wipe out ordinary shareholders.
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As a prudent investor, I would stay far away from Amigo shares, given that the company will eventually be delisted from the London Stock Exchange (LSE) once the orderly wind down is complete.
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However, the shutting down of Amigo Loans is a significant blow to its potential clients who have bad credit and rely on non-traditional lenders such as Amigo for their credit needs. In addition, the clients who needed Amigo’s loans have been stranded by its liquidation, given the company’s crucial role in the subprime credit market.
We must remember that demand for Amigo’s guarantee loans skyrocketed due to the COVID-19 lockdowns, which saw many people lose their jobs and default on their existing loans, leading to bad credit scores that drove many out of the mainstream lending markets.
As a subprime lender, Amigo could provide loans to clients with bad credit scores so long as they had a guarantor who was a homeowner. However, the lender welcomed personal loans without any guarantees under the revised loans issued by Amigo’s RewardRate brand.
Despite its faults under the previous stewardship of the founder James Benamor, there is no denying that Amigo filled a crucial gap in the UK lending market that will be hard to fill. However, whether other companies shall take on the risk of becoming subprime lenders in the UK remains to be seen.
A few private companies offer similar loans to Amigo’s. Still, I don’t think they want to become public companies unless they get backing from private equity or investment funds that may need to exit their investments via IPOs.
Meanwhile, many UK consumers that could have used Amigo’s loans under its new lending arm RewardRate, remain underserved after the company’s exit from the lending space.
*This is not investment advice.
Amigo share price.
The Amigo share price fell 5.83% to trade at 0.28p, from Tuesday’s closing price of 0.298p.
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.