The Amigo Holdings PLC (LON: AMGO) share price soared 74.5% a day before the court hearing on its Scheme of Arrangement to compensate its aggrieved customers who suffered from punitive loan terms from the guarantor lender.
Amigo issued an update regarding the scheme of arrangement. It revealed that the UK’s Finacial Conduct Authority (FCA) would not be opposing the scheme in court but was reserving its opinion while closely monitoring the situation.
Investors cheered news that the FCA did not intend to oppose the New Business Scheme in court but was reserving its right to intervene if Amigo decides to change the terms set out in the schemes, at which point it could intervene.
The FCA also clarified that it did not have a problem with the guarantor lender resuming its lending operations so long as it meets the FCA’s threshold conditions and its new lending system passes the authority’s strict outcomes testing.
Amigo further clarified that it could resume lending activities within the next nine months from the date it filed its New Business Scheme terms with the FCA on 4 March 2022.
Investors had another reason to be optimistic after the FCA said that it would consider where to fine Amigo for its previous actions in light of the impact of such a fine on the potential compensation of the affected customers.
It seems like the FCA is willing to forfeit a hefty fine against Amigo if it impacts the compensation of affected customers. The authority is willing to prioritise the needs of the customers it should be protecting, which is a noble gesture.
The Amigo Loans situation is an excellent example of how a regulator can stop in to protect the interests of consumers. The FCA’s move to oppose the previous scheme of arrangement was bold and appropriate since the scheme would have seen affected consumers receive pennies for each pound Amigo owed them.
On the other hand, shareholders and bondholders would have protected their entire equity and seen the value of their holdings rise if the scheme was approved. Luckily, the FCA managed to oppose and stop this colossal miscarriage of justice.
Amigo’s shareholders now have a reason to smile since it appears that the New Business Scheme will be approved by the courts, saving the company from the brink of insolvency.
As I have mentioned before, demand for Amigo’s guarantor loans has surged significantly, which means that the company still has a significant addressable market once it resumes lending activities.
Investors are eagerly awaiting tomorrow’s convening hearing,w which is likely to go smoothly, and we will be here to let you know if anything else emerges at the hearing.
*This is not investment advice. Always do your due diligence before making investment decisions.
Amigo Loans share price.
Amigo Loans’ share price soared 74.54% to trade at 4.80p, rising from Friday’s closing price of 2.75p.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage . 68 % of retail investor accounts lose money when trading CFDs with this provider . You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money .
Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading