Shares of British guarantor lender Amigo Holdings PLC (LON: AMGO) edged 10.4% higher today, erasing most of yesterday’s losses after the UK’s Financial Conduct Authority (FCA) confirmed that it would oppose its rescue plan at the May 19 court hearing.
The FCA’s position contradicts the stand taken by most creditors who support the plan. According to an online voting portal, 95.1% of the votes cast support the rescue plan to see Amigo resume its lending operations.
The subprime lender has clearly stated that it could be forced to declare bankruptcy if the courts and its creditors do not approve the plan. However, there are concerns about the compensation of Amigo’s directors, which has drawn criticism from different quarters.
Amigo’s rescue plan is likely to be approved by the courts since it only requires the approval of 50% of the voting creditors who represent at least 75% of the total value of the claims against the company.
I last covered Amigo in April, where it had formed a bullish ascending triangle pattern indicating that a breakout to the upside might be imminent. The breakout happened, and investors who read the piece could have profited from the move.
Amigo shares rallied almost 50% above the resistance level identified earlier before dropping yesterday following the FCA’s announcement.
Previous articles on the company showed how institutional investors such as J.P.Morgan were buying stakes in the lender before the FCA gave conditional approval of the rescue plan in anticipation of a positive outcome.
Luckily, the plan is now out of the FCA’s hands as the courts will decide whether or not Amigo should implement it. I expect a positive outcome during the court hearing on19th May.
Amigo Loans share price.
Amigo Loans shares edged 10.40% higher to trade at 25.16p rising from Tuesday’s closing price of 22.79p.