Just weeks after battling his way back onto the board, founder James Benamor has indicated he is a “willing seller” of his Richmond Group's 60.66% stake in the guarantor loans specialist.
As a result, Amigo said it has launched a review of the business and formal sale process in conjunction with adviser RBC Capital Markets, which could see the company sold off as a whole or in parts.
No approaches had been made to the group at the time of the announcement on Monday.
The review will also examine “various aspects of the company's strategy, ownership and operating model”, which comes as Amigo warned that was “concerned that there may be increased pressure on our business and a continual evolution in the approach of the Financial Ombudsman Service”.
It acknowledged that putting itself up for sale could hit future lending volumes, though loan book growth and impairments in the nine months to the end of December remain in line with previous guidance.
Benamor, who founded the group in 2005 but resigned as a director after its 2018 flotation, forced his way back onto the board in December, following a year in which Amigo’s shares had lost around three-quarters of their value after floating at 275p.
Significant red flag to investors
In a note to clients, analysts at Shore Capital said the comments about pressure on Amigo's business and the evolution of the ombudsman was a “significant red flag to investors” and “suggests to us that customer complaints are a significant issue for the group”.
Amigo has been under pressure from the ombudsman and the Financial Conduct Authority to improve the way it conducted business, with regulators concerned that many guarantors do not fully understand the risks they are taking on, that too many guarantors end up paying part of the loan, and that interest rates may be excessive.
Amigo shares plunged 44% on Monday morning to below 40p.
“Will anyone be brave enough to buy guarantor lender Amigo,” wondered Russ Mould at AJ Bell, suggesting that putting its stake up for sale indicated that Benamor/Richmond saw little chance of value generation in the near term.
“This is somewhat odd as Richmond only recently had two of its representatives appointed to Amigo’s board, which led to the resignation of both the chairman and chief executive.
“Richmond had effectively secured prime position to have a major influence on the company’s strategy – so why effectively walk away before there has been enough time to revive Amigo? One can only presume that the regulatory pressures are too much for Richmond to stand a chance of making a difference with its investment,” Mould added.