Goeasy Shares Drop Following C$178 Million Charge-Off
Goeasy shares fell 20% on Wednesday after the lender flagged a C$178 million charge-off. The company also withdrew its financial forecasts for the next three years.
Shares of goeasy Ltd. experienced a second day of heavy selling in Canada, falling 20% on Wednesday following a massive 57% plunge in the previous session. The sell-off was triggered by the non-prime consumer lender's announcement of a C$178 million charge-off and significant write-downs associated with its LendCare division. LendCare, which the company acquired in 2021, focuses on providing financing for the automotive and powersports sectors through a network of third-party merchants. The unit primarily serves customers with weaker financial profiles, a segment that has faced increasing pressure. In addition to the financial charges, the company has withdrawn its financial forecasts for the current quarter and the next three years. Management also disclosed a recently identified error in LendCare's historical reporting practices, which it intends to address in detail during its upcoming earnings report scheduled for March 25. Market analysts have expressed deep concern over the sudden revisions. > We view the development as unambiguously negative for the near-term financial outlook and a major blow to management credibility and investor sentiment. Total net charge-offs across all business units are now projected to reach approximately C$331 million. Furthermore, the company anticipates that its allowance for credit losses on gross consumer loans receivable will increase by about C$86 million in the fourth quarter compared to levels reported at the end of September. Felix Wu, who was officially appointed as the permanent Chief Financial Officer on Tuesday, provided a cautious outlook for the coming months. > We expect pressure on net charge-offs and higher delinquency reporting for the coming quarters, before an anticipated improvement in 2027. The projected increase in loan-loss provisions is expected to result in the breach of several financial covenants. However, goeasy Ltd. stated it has already secured an agreement with its syndicate lenders and is currently in negotiations with other counterparties to manage the situation.
