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Why GreenSky Investors Saw Red Today

By Joe Tenebruso - Mar 3, 2020 at 7:50PM

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Bears were on parade.

What happened

Shares of GreenSky (GSKY) plunged 21.5% on Tuesday, following the release of the financial technology company's fourth quarter results.

So what

GreenSky's revenue rose 22% year over year to $133.8 million, driven by an 11% increase in transaction fees to $100.7 million, and a 77% jump in servicing and other revenue, to $33.1 million.

However, higher costs led GreenSky's adjusted pro forma net income to fall nearly 5%, to $20.5 million, or $0.12 per share. That was below Wall Street's expectations for adjusted earnings per share of $0.13. 

With more than 40% of GreenSky's shares currently sold short, many people are betting against its success. The fintech company's earnings shortfall likely gave these bears a reason to increase their bets against GreenSky, as well as motive for some bulls to offload their shares.

A downwardly sloping line chart

Image source: Getty Images.

Now what

In spite of the skeptics, GreenSky's management team remains optimistic. Chairman and CEO David Zalik sees tremendous room for growth for the type of point-of-sale loans that GreenSky helps to facilitate. "The markets in which we compete are enormous," Zalik said in the company's fourth quarter earnings release.

Still, investors are less bullish on GreenSky's growth prospects, and they've punished its stock, which has shed nearly half of its value over the past year. 

Because of this disconnect, GreenSky's board of directors is currently conducting a review of strategic alternatives, including a possible sale of the company. Management intends to provide an update as to the status of this strategic review by the second quarter of this year.

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