The Amigo (LSE: AMGO) share price has plunged in value this year. The stock started 2020 changing hands at around 70p. However, following the coronavirus crisis, a management spat, and rising losses, shares in the business are now dealing at 13p.
Following this decline, the stock looks cheap compared to history. But that doesn’t necessarily mean the Amigo share price is a stock market crash bargain worth buying today. There are several other factors investors need to consider before buying into this moneylender.
Amigo share price problems
Amigo only became a public business two years ago. Unfortunately, since its IPO in June 2018, the company has lurched from disaster to disaster.
This year has been particularly painful for the company and the Amigo share price. In March, its founder, James Benamor, who owned nearly two-thirds of the business, called for the company to immediately cease lending operations and challenge regulators’ claims against the business. The Financial Ombudsman Service and Financial Conduct Authority have both been placing pressure on the corporation to pay compensation to borrowers who have complained about Amigo’s lending practices.
When the company ignored its founder’s request, Benamor tried to seize control of the business with a shareholder vote in June. This attempt failed. The Amigo share price fell further when the founder then announced that he’d be selling his entire 60%-plus shareholding.
A week later, the company published more bad news. It announced that it was suspending the publication of its full-year results and setting aside more cash to deal with a substantial increase in the number of customer complaints.
Amigo has now brought former CEO Glen Crawford back to try and turn its fortunes around. The CEO stepped down last year for health reasons. He helped take the business public in 2018.
However, only time will tell if Crawford will be able to turn things around. The lender has some severe issues. If customer complaints continue to rise, there’s a genuine chance the business could become insolvent. That would be bad news for the Amigo share price.
On the other hand, if the new management can bring compensation claims under control, Amigo might be able to return to growth.
Over the past few years, many of the organisation’s peers in the high-interest loan market have collapsed, which gives the company plenty of scope to take market share. At the same time, many people are facing financial difficulty in the coronavirus crisis, and Amigo could provide some help.
Therefore, the outlook for the Amigo share price is mixed. If the company can capitalise on the current environment and get rising claims under control, it may be able to return to growth. If not, the business may not last for much longer.
As such, it may be sensible to own the stock as part of a well-diversified portfolio.
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Rupert Hargreaves does not own any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.