For traders and investors interested in an undervalued play in the technology-enhanced financial services space, Atlanticus Holdings Corp (NASDAQ: ATLC) may be worth a long look right now. The stock trades on a tiny float (well under 5 million shares) and recently secured a major new source of funding to power new expansion.
To wit: The company recently announced the closing of a $100 million asset-backed, revolving credit facility with Credit Suisse AG, Cayman Islands Branch, a leading financial services provider. According to the release, “The new facility allows for a total of $190 million in committed debt capital (when combined with existing facilities) to fund our investments in Fortiva branded general-purpose credit card receivables.”
Atlanticus Holdings Corp (NASDAQ: ATLC) bills itself as a company that provides credit and related financial services and products to financially underserved consumer credit market in the United States. It operates in two segments, Credit and Other Investments, and Auto Finance.
The Credit and Other Investments segment originates a range of consumer loan products, such as retail credit, personal loans, and credit cards through various channels, including retail point-of-sale, direct mail solicitation, Internet-based marketing, and partnerships with third parties; and offers point-of-sale financing by partnering with retailers and service providers to provide credit to their customers for the purchase of various goods and services.
This segment also invests in and services portfolios of credit card receivables. In addition, this segment offers loan servicing, such as risk management and customer service outsourcing for third parties; and engages in testing and investment activities in consumer finance technology platforms.
The Auto Finance segment purchases and/or services loans secured by automobiles from or for a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here, and used car business. This segment also provides floor plan financing and installment lending products.
The company was formerly known as CompuCredit Holdings Corporation and changed its name to Atlanticus Holdings Corporation in November 2012. Atlanticus Holdings Corporation was founded in 1996 and is headquartered in Atlanta, Georgia.
According to company materials, “Founded in 1996, our businesses, including the Fortiva branded products, utilize proprietary analytics and a flexible technology platform to enable financial institutions to provide various credit and related financial services and products to the financially underserved consumer credit market. We apply the experience gained and infrastructure built from servicing over 17 million customers and $25 billion in consumer loans over our 22-year operating history to support lenders that originate a range of consumer loan products. These products include retail credit, personal loans, and credit cards marketed through our omni-channel platform which includes, retail point-of-sale, direct mail solicitation, Internet-based marketing and partnerships with third parties.”
Powering Up
As noted above, the company just secured a ton of new financial flexibility in the form of a major new credit facility capable of powering nearly $200M in new expansion.
According to the release, “The revolving credit facility follows the closing of our previous $90 million revolving credit facility with TowerBrook Capital Partners L.P. (“TowerBrook”), a transatlantic investment management firm, provided by TowerBrook’s Structured Opportunities Fund. Both facilities established a program under which we sell certain credit card receivables acquired by us to a consolidated trust in exchange for notes issued by the trust. The notes are secured by the receivables and other assets of the trust.”
In addition, ATLC has a significant war chest ($78.5M) of cash on the books, which compares with about $73M in total current liabilities. ATLC is pulling in trailing 12-month revenues of $157M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 51.2%.
Consider that the market now only holds the company at $28.5M in market capitalization. The upside opportunity could be dramatic if things fall into place.
“This new credit facility provides us with the additional capacity to continue our growth as we work to enable financial institutions to empower millions of financially underserved Americans,” said Jeff Howard, President, Atlanticus Holdings Corporation.
With volume now running through the roof (transactions booming to 800% above the stock’s longer-term average), that tiny float could be a recipe for a squeeze higher.
