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May 25, 2021, 11:51 a.m. EDT

Shares in subprime lender Amigo lose more than half their value as fears of collapse loom

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By Jack Denton

A British court has rejected a controversial plan from sub-prime lender Amigo Holdings which would allow it to cap customer compensation, raising fears of collapse and sending the stock price plummeting.

Shares in Amigo /zigman2/quotes/205438260/delayed UK:AMGO -3.51% , a guarantor loans lender listed in London, dropped as much as 61% on Tuesday, before settling 55% lower, after the group said the U.K. High Court had not approved its plan. The stock was trading around 8.3 pence (11.6 U.S. cents) and is down near 60% over the last year.

Amigo issues loans up to £10,000 ($14,200) which must be guaranteed by another individual, like a relative, and charges an interest rate of 49.9%.

Facing costs of paying refunds to borrowers and guarantors from cases of mis-sold and unaffordable loans, Amigo proposed a scheme of arrangement with creditors in December 2020 that would cap its liabilities. Under the scheme, customers would receive just a fraction of any successful claim, with the compensation pool capped at £35 million.

“Amigo is incredibly disappointed that the Scheme has not been approved despite the 74,877 customers who voted in support of the Scheme, representing over 95% of those who voted,” said Gary Jennison, Amigos’ chief executive. “We are currently reviewing all our options and will provide an update at the earliest opportunity.”

The scheme was opposed in court by the U.K.’s financial regulator, the Financial Conduct Authority, on the grounds that it was not fair. The company, whose customers typically include people with very poor credit histories, has also come under fire from lawmakers and activists.

“The company’s plan to cap customer compensation was struck out by the High Court, raising yet more questions over the future of the business,” said Russ Mould, an analyst at AJ Bell. 

Amigo’s performance, which analyst Mould called a “horror show,” met a mixed day of trading in London. 

The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -0.31% , the index of the top U.K. stocks by market capitalization, ended the day 0.2% lower, , falling behind other major indexes such as the pan-European Stoxx 600 /zigman2/quotes/210599654/delayed XX:SXXP -0.51% and Frankfurt’s DAX /zigman2/quotes/210597999/delayed DX:DAX -0.63% , which notched fresh highs on Tuesday.

Also read: European equities return to record highs, with German stocks boosted by $22 billion property deal

“The FTSE 100 was struggling for direction like a drunkard in a blindfold on Tuesday morning, not unfairly given the continuing uncertainties over vaccines versus variants, the risks of inflation and the continuing volatility in the commodity and cryptocurrency markets,” Mould said.

Shares in Argo Blockchain /zigman2/quotes/209037613/delayed UK:ARB +4.17% , a London-listed crypto miner, rose near 13% after the group said it joined the new Bitcoin Mining Council to “promote energy transparency and improve sustainable mining practices.” The crypto space, and bitcoin in particular, has come under fire from high-profile critics including Elon Musk, the chief executive of electric-vehicle company Tesla /zigman2/quotes/203558040/composite TSLA +3.02% , over its environmental impact. 

Argo and other miners joined in a discussion with Musk on May 23 over environmental and social issues related to the crypto mining. The practice uses large amounts of energy to power computers that verify transactions on the blockchain—the decentralized ledger technology that underpins bitcoin and other crypto assets.

The price of bitcoin /zigman2/quotes/31322028/realtime BTCUSD +2.85% has declined more than 35% since the beginning of May and was as much as 5% lower on Tuesday.

Plus: Dogecoin, bitcoin prices climb as Elon Musk solicits help to improve meme coin, talks sustainability with miners

Industrial software group Aveva’s /zigman2/quotes/202038414/delayed UK:AVV -0.94% stock near 2% after the group’s full-year financial results showed sales and earnings outpaced expectations. One of the U.K.’s oldest technology companies, analysts at Swiss bank UBS /zigman2/quotes/206172872/composite UBS +0.76% noted that Aveva showed a strong margin and that its recovery from the COVID-19 pandemic seemed underway.

More broadly, the telecommunications sector was the weakest link on the FTSE 100, with shares in both BT /zigman2/quotes/209006687/delayed UK:BT.A -0.71% and Vodafone /zigman2/quotes/202484985/delayed UK:VOD -0.33% falling.

/zigman2/quotes/205438260/delayed
UK : U.K.: London
11.00 p
-0.40 -3.51%
Volume: 593,259
Oct. 18, 2021 9:57a
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
£54.19 million
Rev. per Employee
N/A
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/zigman2/quotes/210598409/delayed
UK : FTSE UK
7,211.29
-22.74 -0.31%
Volume: 133,812
Oct. 18, 2021 11:33a
loading...
/zigman2/quotes/210599654/delayed
XX : STOXX
466.98
-2.41 -0.51%
Volume: 0.00
Oct. 18, 2021 12:33p
loading...
/zigman2/quotes/210597999/delayed
DAX
DX : Xetra Indices
15,489.18
-98.18 -0.63%
Volume: 16,566
Oct. 18, 2021 12:33p
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/zigman2/quotes/209037613/delayed
UK : U.K.: London
125.00 p
+5.00 +4.17%
Volume: 5.41M
Oct. 18, 2021 11:00a
P/E Ratio
58.96
Dividend Yield
N/A
Market Cap
£560.50 million
Rev. per Employee
N/A
loading...
/zigman2/quotes/203558040/composite
US : U.S.: Nasdaq
$ 843.03
+24.71 +3.02%
Volume: 18.92M
Oct. 15, 2021 4:00p
P/E Ratio
439.28
Dividend Yield
N/A
Market Cap
$834.61 billion
Rev. per Employee
$445,694
loading...
/zigman2/quotes/31322028/realtime
US : CoinDesk
61,169.74
+1,697 +2.85%
Volume: 0.00
Oct. 18, 2021 6:47a
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/zigman2/quotes/202038414/delayed
UK : U.K.: London
3,597.00 p
-34.00 -0.94%
Volume: 23,435
Oct. 18, 2021 11:32a
P/E Ratio
261.41
Dividend Yield
1.00%
Market Cap
£10.94 billion
Rev. per Employee
£174,553
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/zigman2/quotes/206172872/composite
US : U.S.: NYSE
$ 17.28
+0.13 +0.76%
Volume: 2.41M
Oct. 15, 2021 4:00p
P/E Ratio
8.36
Dividend Yield
2.12%
Market Cap
$59.80 billion
Rev. per Employee
$450,560
loading...
/zigman2/quotes/209006687/delayed
UK : U.K.: London
139.60 p
-1.00 -0.71%
Volume: 2.33M
Oct. 18, 2021 11:32a
P/E Ratio
9.55
Dividend Yield
5.52%
Market Cap
£13.93 billion
Rev. per Employee
£214,624
loading...
/zigman2/quotes/202484985/delayed
UK : U.K.: London
110.08 p
-0.36 -0.33%
Volume: 9.40M
Oct. 18, 2021 11:32a
P/E Ratio
579.37
Dividend Yield
7.10%
Market Cap
£30.33 billion
Rev. per Employee
£372,306
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