Shares of Consumer Portfolio Services Inc. (Nasdaq: CPSS) jumped as much as 54% after receiving an all-cash buyout offer for $135 million.
Dallas-based Auto Experience Inc., created in 2018 to pursue strategic business opportunities in the automobile financing market, offered $6.18 a share, which is almost double yesterday $3.35 closing price.
After initially climbing as high as $5.12, shares settled at $4.66, or 39%, an indication that the deal might not occur. Volume was more than 5 million, almost 300 times its daily trading average of 17,775. Shares of the Irvine-based company, which has a $105 million market cap, haven’t been above $6 since 2015.
"CPS is significantly undervalued based on a range of performance measures and upside growth opportunities, and we believe our proposed acquisition would be materially beneficial to shareholders and, over the longer run, to consumers and dealers," Auto Experience Chief Executive Samuel M. Ellis said in a statement.
For nearly a decade, Ellis served as senior vice president of risk management for GM Financial/AmeriCredit, the financial arm of General Motors Corp. Ellis previously founded Dallas-based DriverUp, an online marketplace focused exclusively on automobile finance, and Exeter Finance Corp., also based in Dallas.
The business of Consumer Portfolio Services is based on purchasing retail installment contracts from franchised automobile dealerships, funding contract purchases primarily through the securitization markets and servicing the contracts over their lives.
Consumer Portfolio began operations in 1991 and has purchased nearly $17 billion in contracts from its inception through the first half of 2020. At mid-year, it reported actively servicing a contract portfolio of approximately $2.3 billion and 173,000 customers. Consumer Portfolio's full-year 2019 revenue was $346 million with net income of $5.4 million.
Consumer Portfolio, whose CEO is Charles E. Bradley Jr., hasn’t yet responded publicly to the offer.