GWG Holdings Inc (NASDAQ: GWGH) is having an overwhelmingly strong day in the market today, and for good reason. The company announced that it has entered into a key strategic relationship, leading to excitement among investors and sending the stock screaming for the top. Today, we’ll talk about the news, what we’re seeing from GWGH, and what we’ll be watching for ahead.
GWGH Climbs On Strategic Transaction
As mentioned above, GWG Holdings is having an overwhelmingly strong day in the market today after announcing that its subsidiary, GWG Life and Life Epigenetics, entered into a strategic relationship. According to the press release, GWGH entered into a strategic relationship with The Beneficient Company Group, L.P.
In the release, GWGH said that the transaction is expected to significantly increase common shareholder equity, diversify its balance sheet, income statement and cash flow sources while creating opportunities to leverage existing infrastructure and capabilities.
In the release, GWGH said that as part of the transaction, the company will acquire 82% of the outstanding BEN MLP unites from existing unit holders. As a result, BEN will have more than $800 million in tangible financial assets pro forma for the transaction. From there, GWG Holdings will also enter into a $400 million, four-year commercial loan with BEN to enable BEN to continue building out its suite of liquidity products. In a statement, Jon Sabes, GWGH CEO, had the following to offer:
“We are pleased to announce a strategic relationship with one of the most innovative companies in the alternative asset industry… BEN is partnering with GWGH because they’ve identified life insurance asset class as a key enhancement to their diversified endowment portfolio of high-quality alternative assets for which they provide loans and liquidity. And while GWGH will continue to execute our announced strategies to our utmost capacity, we also look forward to rolling out BEN’s innovative alternative asset liquidity products to independent broker-dealers and RIAs once BEN obtains its pending regulatory approvals.”
The above statement was followed up by William Acheson, CFO at GWG Holdings. Here’s what he had to offer:
“This transaction stands to potentially double our assets to over $1.6 billion and quadruple our total equity to over $500 million… This is a transformational vote of confidence in GWGH, giving us both a scaled balance sheet and an additional source of current earnings which complements our large and growing life insurance portfolio. Additionally, we believe we will achieve greater access to the capital markets, creating opportunities to further optimize our capital structure and lower our cost of capital which is an important driver of shareholder value.”
How The Stock Is Reacting To The News
As investors, one of the first things that we learn is that the news moves the market. In this particular case, the news out of GWG Holdings proved to be overwhelmingly positive, leading to strong gains in the value of the stock. Currently (10:26), GWGH is trading at $9.20 per share after a gain of $1.10 per share or 13.58% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on GWGH. In particular, we’re interested in following the story surrounding the partnership and excited to learn more about how the company will leverage this new partnership for maximum benefit to shareholders. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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