Profit on a Lending Slowdown: Friday Short Report

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Downward momentum from yesterday’s session continued into today. Macro news was relatively quiet, though the University of Michigan released new consumer sentiment data showing a slight downtick in confidence. Analysts believe lagging market performance may be a reaction to political wrangling over US tax reform.

Today, our Top Performer is a short play, earning News Quantified users profits far in excess of broader market losses. Financials continue to lead recent market retreats, with today’s stock indicative of flagging lending revenues in the broader economy.

J.G. Wentworth (JGWE):  plummets as investors reject restructuring plan.

JGWE focuses on consumer-facing financial products including mortgage lending and refinancing, structured legal settlements, annuity and lottery payment financing, prepaid cards, and personal loan brokering.

The company has been struggling with their own debt burden of late. Today, they announced an agreement with creditors to substantially restructure their financial commitments and regain access to key credit facilities. Management hopes a return to liquidity will help JGWE expand into new financial product areas and begin restoring strong revenue growth. Although loan originations have continued to grow, net profits have not kept pace.

Although the restructuring process is voluntary, and management insists that day-to-day operations will not be affected, investors were not sold on the restructuring plan. They sold the stock on heavy volume on the news, driving the stock to losses over 80% at the time of this writing. The price fell as much as 94% before consolidating at its current level.

This restructuring is the second major financial reboot undertaken by JGWE in the last decade.

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