Subprime Lender GoEasy Plunges on Credit Losses
Subprime lender GoEasy experienced a catastrophic stock crash (down ~60%) following a surprise financial update, dramatically revising expectations for credit losses. The company's net charge-off rate for 2025 was revised up to 12.9%, with 2026 projected in the “mid-teens.” The company also breached lender covenants, suspended dividends and share buybacks, and saw both CEO and CFO depart recently.
GoEasy's stock plummeted from $170 to around $60 following the announcement, triggering trading halts. The company's revised outlook cited a "rapid deterioration" in the credit quality of its loan portfolio as the primary driver for increased losses. The departure of CEO Jason Mullins and CFO Hal Khouri preceded the financial update, adding to investor concerns about the company's stability. GoEasy's previous guidance had projected a net charge-off rate of approximately 9.5% for 2025, making the revised 12.9% figure a significant negative surprise. Analysts at National Bank downgraded GoEasy to "Sector Perform" with a reduced target price of $80, citing concerns about the sustainability of the company's lending model in the current economic environment. RBC Capital Markets also lowered its target price from $210 to $75. The breach of lender covenants raises questions about GoEasy's access to capital and its ability to fund future loan growth. The company is reportedly in discussions with its lenders to amend the terms of its debt agreements. The suspension of dividend payments and share buybacks is intended to preserve capital and improve the company's financial flexibility. However, these actions are likely to further erode investor confidence in the near term.
