Amigo Holdings (LON: AMGO) is a long, painful, tale of a company getting shafted while it did nothing particularly wrong. Well, nothing particularly legally wrong by the standards and law of the time that it did it perhaps. But fashions change, morals change and so, eventually, does the law change. This has caught out several - like Morses Club among others - in the high cost credit industry.
The background here is that es, lending small sums of money for short periods of time is expensive. There are costs to making any decision at all. So, when we calculate all of those costs as an annual interest rate - the APR calculation - then those small, short term, loans look glaringly expensive. This is true of payday loans and of all similar low value and short term credits. Add in the higher default rates in this sector and we get interest rates to enrage a Guardian columnist. Which is, in shorthand, exactly what happened.
Amigo Holdings share price from London Stock Exchange
The law changed, what was formerly legal became not so and the business starts to die. But what really killed many of these credit providers is that either the law changed retrospectively - what folk thought were legal past loans turned out not to be, requiring compensation - or enough lawyers thought they'd chance their arm by claiming so.
Wonga did go out of business after all, Amigo's just following in those footsteps. But here's the thing about the AMGO share price. Amigo isn't even going to try to revive the business. It's winding itself down. And as they say, there isn't going to be anything for the equity. The share price almost certainly should be zero right now. Which really only leaves that question of who has been speculating in it so as to cause that uptick at the right of that chart? A 600% price rise over a couple of days? When there's no terminal value likely at all?
Sure, some people will speculate on anything but no wonder the company itself, Amigo, has had to announce that it doesn't know why that AMGO share price was rising.
