Evil Diaries: AMGO revisited

There is a rather silly article in this morning’s Times which is bearish on prospects for Amigo (AMGO). Perhaps the author is right in doubting prospects but his understanding of the current state of play is seriously inadequate.

He points out that were the guarantor instead to lend to the borrower and to cut out AMGO altogether a much lower rate of interest could apply. But this is to miss the point which is not that the guarantor might lack the ready cash to lend but that the guarantor would prefer to be asked for cash once it was properly established that the borrower had defaulted and been properly asked to repay.

And then there are some who will claim that guarantor-backed loans are pernicious. Well they are not cheap but they are available and where the alternative is illegally extended loans that can lead to violence when they are collected. I would also mention that AMGO is by no means the most expensive: there are operators charging 100% p.a.. AMGO was/is (take your pick) a trivial 50% p.a..

It is true that there is a risk of a fine pursuant to proceedings to be brought in the new year by the FCA and that no level of such a fine is available to shareholders who are now warned that there will be a fund raise in 2022. Perhaps the FCA could indicate a figure prior to the improved Scheme of Arrangement coming before the High Court in a few weeks’ time.

On balance, AMGO seems to me to remain a sound buy given that the new management are prepared to put their backs into making a lawful success of the new capital structure.

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Over at Webis (WEB) where the chairman of Master Investor is a significant shareholder a profit is this morning reported. It’s not a great profit but given the size of WEB it is a good start. It is important to remember that the Americans are at last growing up and permitting a sensible regime for sports betting punters which excludes the mob and other undesirables. WEB has a toe hold and could make a huge success of this opportunity. The economy of California, WEB’s centre of operations, is vast.

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Finally, Warren Buffett’s chum, Charlie Munger reckons that today’s American markets are as overvalued as they were at the time of the dotcom boom twenty years ago. He may be 98 but he is compos mentis. We have been warned.