goeasy (GSY) dropped nearly 60% yesterday after throwing out the kitchen sink, guiding to a mid-teens charge-off rate in 2026 and ~13% for 2025 - which translates to $331M of write-offs in Q4…

… and an additional $86M build in reserves.

Together, that means provisions for the quarter will be north of $400M - wiping out almost all profits earned through the year…

… and driving a breach of certain credit facility covenants, which poses a material risk to the lender’s funding model and returns. At a minimum, the securitized facility (low cost) should be impacted…

… given most of the damage is tied to the auto book that backs it up, which GSY scaled post-acquisition (goodwill impairment?) by doubling its dealer network.

While new management will look to refocus on direct-to-consumer lending, the stock will likely stay in the penalty box - with guidance pulled, buybacks paused, and the dividend suspended.

As for the noise around contagion… unlikely in my view. This appears more like a governance issue than a systemic one, with banks reporting solid Q1 numbers.

Kraken Robotics (PNG) was up 12% on word that Iran was laying mines in the Strait of Hormuz, which makes its recent $615M acquisition of Covelya Group even more topical - as it meaningfully expands the company’s subsea capabilities…

… and broadens its geographic mix.

Beyond diversification, it’s a scale deal - enabling Kraken to go after larger contracts while retaining financial flexibility…

… with pro-forma net leverage sitting at 0.8x, given the deal was funded primarily with equity. With PNG sitting downstream of higher defence spend, much of which is earmarked for new equipment…

… its stock will likely remain a viable currency for future M&A.

Was this forwarded to you? Join 9,000+ investors reading The Morning Meeting by clicking the button below.