The Amigo Holdings PLC (LON: AMGO) share price plunged 17.3% after issuing an update about its general meeting of shareholders scheduled for today. The mid-cost credit company revealed that it was still struggling to find investors for its £45 million equity raise.
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With the 26 May 2023 deadline approaching, Amigo is at risk of switching from the Scheme Arrangement to the ‘Fallback Solution’, an orderly wind-down of its business. However, the company reassured its creditors that they would be compensated if it had to revert to the fallback position.
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The lack of interest from institutional investors in Amigo’s court-mandated equity raise is alarming, given that the company previously had the support of US investment bank J.P. Morgan, which had bought a 5% stake in the guarantor lender in February 2021.
It appears that J.P. Morgan does not want to double down on its bet, given the amount of money the leading investment bank manages. Investing £45 million in a company is pocket change for the US investment bank, but it seems keen to cut its losses and run.
Amigo revealed that while there was significant interest in its new RewardRate program, converting leads to customers remained challenging, limiting the number of loans it was originating. The lender also revealed that conversions from its non-guarantor loan product were higher than from its guarantor-based loans.
Therefore, the lender has decided to temporarily pause its guarantor-loan product originations due to the higher acquisition costs associated with the product and the lower conversion rate compared to the non-guarantor loan product.
Amigo noted that the pause was temporary until it raised the £45 million, after which it would resume originating guarantor loans. Still, there is no guarantee that the equity raise will be successful given that it had received non-binding, indicative interest for between £10m and £15m of equity and £10m of exchangeable notes.
The lender also announced that it had exited its unprofitable Irish lending business on 28 February 2023 after ceasing lending operations in 2020. The company is running out of time to find enough backers for its £45 million equity raise.
*This is not investment advice.
Amigo share price.
The Amigo share price plunged 17.31% to trade at 2.15p, from Tuesday’s closing price of 2.60p.
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