Chesswood Group’s shares jumped Tuesday following the launch of a strategic review that will consider a number of options for the speciality-finance provider, including a potential sale or wind down of portfolios.
In early trading, the shares were 4.7% higher at C$8.29, narrowing the drop over the last 12 months to 25%.
Chesswood late the previous day said a special committee will retain external financial advisers to assist in its review, though it added the process may not result in any significant change.
Mike Rizvanovic, an analyst at Keefe, Bruyette & Woods, said the review comes as a surprise given Chesswood’s progress on funding new funding partners but could unlock value for shareholders. Rizvanovic said the company has been trading at a heavily discounted valuation, with a recent price-to-book value multiple of 0.68 times against the 10-year average of 1.31 times, reflecting higher funding costs in the high interest-rate environment and the trajectory of charge-offs that have been elevated in recent quarters.
The Toronto-based company, which offers commercial equipment leases and loans, automotive loans, home-improvement financing, legal financing and asset management, suspended its dividend during the review process and said the reinstatement of payouts would be dependent on the outcome of the review. It plans to complete the review by the end of March.