Amigo Loans share price soared 74.5% ahead of hearing

Key points:

  • Amigo Loans’ share price soared 74.5% and more ahead of the hearing.
  • Investors cheered that the FCA would not oppose the new regime.
  • As a result, the guarantor lender could soon resume its lending activities.

Amigo Holdings PLC (LON: AMGO) stock price soared 74.5% the day before a hearing on its plan of arrangement to compensate injured clients who suffered from the guarantor’s punitive loan terms.

Amigo has released an update regarding the plan of arrangement. He revealed that the UK’s Finacial Conduct Authority (FCA) would not oppose the scheme in court, but reserved its opinion while monitoring the situation closely.

Also read: Best financial stocks to buy right now.

Investors applauded the news that the FCA did not intend to oppose the New Business Scheme in court, but reserved the right to intervene if Amigo decided to change the terms set out in the schemes, to which case it could intervene.

The FCA also clarified that it has no problem with the guarantor lender resuming lending operations as long as it meets the FCA’s threshold conditions and its new lending system passes the stringent performance tests of authority.

Amigo further clarified that it could resume lending activities within the next nine months from the date it filed its terms of the new business program with the FCA on March 4, 2022.

Investors had another reason for optimism after the FCA said it would review where to fine Amigo for its previous actions in light of the impact of such a fine on potential compensation for affected customers. .

It looks like the FCA is willing to waive a hefty fine against Amigo if it impacts compensation for affected customers. The authority is ready to prioritize the needs of the customers it should protect, which is a noble gesture.

The Amigo Loans situation is an excellent example of how a regulator can intervene to protect consumer interests. The FCA’s decision to oppose the previous scheme of arrangement was bold and appropriate, as the scheme would have seen affected consumers receive pennies for every pound Amigo owed them.

On the other hand, shareholders and bondholders would have protected their entire equity and seen the value of their assets increase if the scheme were approved. Fortunately, the FCA managed to oppose and stop this colossal miscarriage of justice.

Amigo shareholders now have a reason to smile as it looks like the New Business Scheme will be approved by the courts, saving the company from the brink of insolvency.

As I mentioned before, demand for Amigo’s collateral loans has increased significantly, meaning the company still has a large addressable market once it resumes lending activities.

Investors are looking forward to tomorrow’s convening hearing, which should go smoothly, and we’ll 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 stock price IG chart 07-03-2022
Source: IG

Amigo Loans’ share price climbed 74.54% to trade at 4.80p from Friday’s closing price of 2.75p.

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