Covering the twists and turns that have driven the Amigo (LSE: AMGO) share price over the past few months has been fascinating. The company has become one of the most interesting corporate stories on the London market over the past 12 months.
Earlier this year, it looked as if the lender would collapse under a mountain of compensation claims from former and current borrowers. While it was dealing with these issues, its former founder and CEO, James Benamor, tried to regain control.
A vicious war of words followed. Shareholders eventually threw out Benamor’s proposals. After the defeat, he promised to step back, sell down his stake in the business and leave Amigo alone.
He did for a few months, but the founder has now resumed his attack on the company.
Amigo share price attack
At the end of last week, Benamor said he wanted to return to the troubled subprime lender as CEO to lead an international expansion. The current CEO, Glen Crawford, would be left to run the UK business, the founder noted.
Crawford rejected this proposal almost immediately. Benamor has now called for a general meeting to oust most of the company’s current management.
Amigo’s boardroom tussle has distracted its management for long enough. In my opinion, fighting over who’s going to run the business is a waste of time and effort. For a company in crisis, it could draw management’s attention away from more important matters.
However, I can’t see why the current management is so against Benamor’s return. He founded the business and turned it into a billion-pound enterprise. He probably knows more about the company and its potential than anyone else.
And before he sold his 61% stake in the business, he had more money on the line than anyone else.
Set on making a return
Following these recent developments, it’s clear Benamor is set on regaining control. That suggests he could put forward a takeover offer for the Amigo share price if his latest attack fails.
In the meantime, Amigo is making progress in dealing with historical issues. Its latest trading update showed an 81% decline in profit and a 32% decline in revenue, but its provision for complaints was broadly unchanged at £116.4m.
At the end of the quarter, the company had £170.5m of equity and, at the end of July, it had more than £145m of unrestricted cash.
I think these numbers show the firm has enough cash on hand to deal with its problems and restart lending. Indeed, the business is planning to restart lending towards the end of the year.
As such, I’m cautiously optimistic on the Amigo share price. If the company can begin lending towards the end of the year, it could return to growth in 2021. At the same time, if its founder decides to make an offer for the business, it may be significantly higher than the current share price.
In either scenario, investors may see a positive return.
