Investors react as goeasy shares plunge nearly 60 percent after the company halted dividends and warned of major loan loss charges.
Shares of goeasy Ltd. tumbled sharply Tuesday after the Canadian non-prime lender suspended its dividend, withdrew its financial outlook, and warned of major charges tied to loan losses.
The stock fell nearly 60 percent during afternoon trading on the Toronto Stock Exchange, dropping $65.90 to about $49.65.
The sudden decline came after the company revealed it expects to record more than $200 million in charges in its upcoming fourth-quarter results.
Large Charges Linked to Loan Losses
Goeasy said it anticipates a $178-million charge related to bad loans connected to its LendCare financing business.
In addition, the company expects to record roughly $55 million in writedowns tied to loan interest and fees.
The lender also warned that its allowance for credit losses on consumer loans will rise significantly. It estimates a net increase of $86 million in provisions during the fourth quarter compared with the level reported on Sept. 30.
These developments prompted the company to withdraw its previously issued financial guidance.
Dividend Suspended
Alongside the financial adjustments, goeasy announced it would suspend its dividend, a move that further rattled investors and contributed to the steep drop in its share price.
Dividend suspensions are often viewed as a signal that companies are trying to conserve cash during periods of financial uncertainty.
Leadership Update
The company also confirmed that Felix Wu has been appointed chief financial officer, effective immediately.
Wu had been serving as interim CFO since Sept. 30.
Results Expected Soon
Goeasy said it plans to release its full fourth-quarter financial results on March 25, when investors will get a clearer picture of the company’s financial position and the impact of rising loan losses.
