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GreenSky shares tank 28% as board explores strategic alternatives

GreenSky Inc. shares are down more than 28% to $7.40 as of 10:27 a.m. ET on Aug. 6 after the company announced its board will explore strategic alternatives.

The digital lender's board is evaluating alternatives just over a year after the company went public. The disclosure comes alongside GreenSky's second-quarter earnings, in which it reported net income attributed to the company of 19 cents per share, five cents lower than the consensus estimate. In announcing the strategic review, Chairman and CEO David Zalik said GreenSky does not believe the company's current market value is reflective of its "strong record of cash flow generation and intrinsic value."

On a call to discuss the quarter's earnings, management said the board will be comprehensive in its review. The company has no timeline for completion of the review and will update as the process unfolds.

"We're certainly not going to take anything off the table," Zalik said of possible moves. GreenSky shares have dropped to their lowest value since the company went public last year.

In a nod to past concerns about GreenSky's ability to attract bank capital, the company also announced a new funding option, which will be open to insurance companies, institutional asset managers, or government-sponsored pension plans to augment its existing bank-based funding model.

Under the new model, GreenSky collects a transaction fee when the loan is originated, with the risk of the loan placed on the financing partner's balance sheet. In its existing funding model, GreenSky absorbs some risk on the performance of deferred interest loans. GreenSky is liable to make a payment to its bank partners if a borrower successfully pays off the loan in the promotional period.

Current bank partners that wish to explore the new funding model can do so, executives said. But GreenSky will also continue to support them through the existing model. As of June 30, GreenSky had $11.9 billion in aggregate funding commitments from its bank partners, of which $4.0 billion was unused.

The drop in GreenSky's shares came a day after the broader U.S. equity markets saw their worst single-day performance of 2019. As of 10:27 a.m. ET, the S&P 500 was up 0.56% to 2,860.64.

S&P Global Market Intelligence is owned by S&P Global Inc. Market prices and index values are current as of the time of publication and are subject to change.