Michael P. Regan is a Bloomberg Gadfly columnist covering equities and financial services. He has covered stocks for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

What's one more red flag when you're a red-flag machine like Santander Consumer USA Holdings?

Santander Consumer announced this week that it still couldn't quite accomplish the feat of filing its second quarter 10-Q report with the Securities and Exchange Commission. It didn't create too much of a dent in the stock, however. The shares of the subprime auto lender rose as much as 4.8 percent during Wednesday's session before following the overall market lower and ending the day down less than 0.6 percent. They were up slightly in early trading on Thursday.

Perhaps some of the wording in the statement soothed concerns about how ugly the filing could potentially be:

The Company has reviewed all critical relationships and does not foresee a material interruption in or change to normal business activities related to the delayed filing. In addition, the aforementioned accounting matters relate only to non-cash items in our financial statements. 

Trees don't grow to the sky, it's often said in reference to stocks that have trouble continually reaching new highs. As a corollary, one might observe that stocks don't go to zero (at least not often), so it's tempting to speculate that the market has priced in all the damage that can be done to Santander Consumer after its shares lost about two-thirds of their value between June of 2015 and March of this year: 

Car Wreck
Shares of subprime auto lender Santander Consumer USA Holdings lost about two-thirds of their value in less than a year
Source: Bloomberg

That's left the stock trading below book value with a tantalizing P/E ratio of about five times estimated 2017 earnings that's sure to be noticed by value hunters, considering its 18 percent return on equity would be the envy of most banks. 

But it's hard to imagine all of the red flags surrounding the company going away soon. The current delay in its second-quarter report centers on accounting issues with "discount accretion and credit loss allowance methodologies," which might be fine if it was the only red flag. But in March, it lowered profit figures for the last three years and the fourth quarter after earlier missing a second deadline for publishing its annual report. 

Over the past two years, it's had a series of well-documented run-ins with the government over accusations that it illegally repossessed cars from members of the military and overcharged "protected groups" such as ethnic and religious minorities, not to mention investigations into how its loans are packaged into securities. 

Subprime auto lending may be too easy of a target for regulators to ignore in the era of the Consumer Financial Protection Bureau, given that the business model can be summed up succinctly and despicably in headline form like the New York Times' "Investment Riches Built on Subprime Auto Loans to Poor." Or with a less succinct, but no less despicable, portrayal like John Oliver's rant about how the industry can steer vulnerable borrowers into crushing debt because, to many, a car is even more important than a house when it comes to keeping a job. 

Important people have left Santander Consumer to do other things. CEO Thomas Dundon stepped down last year to "pursue new opportunities" and his departure was "unrelated to the company's performance or regulatory standing,"  according to a statement at the time. (Asked a few days later in an interview what opportunity he was pursuing next, he said he hadn't decided.) 

Wall Street legend Blythe Masters was named chair of Santander Consumer in July 2015 but resigned a year later to be a blockchain adviser at Banco Santander, the Spanish lender that controls the company through a 59 percent ownership stake held by Santander Holdings USA. That unit by the way, has the dubious distinction of flunking the Federal Reserve's stress tests for three years running, pouring cold water on any hopes that the parent would buy out the publicly traded remainder of the company.

Whether or not lingering concerns of a bubble in subprime auto lending turn out to be warranted, it may be tough for companies like Santander Consumer to avoid the paranoia about when the credit cycle will turn. Its net charge-off rate stands out not only for being higher but also more volatile than other auto lenders that don't focus as much on subprime, according to a tally from Bloomberg Intelligence's Ryan O'Connell  and Himanshu Bakshi:

Risky Business
Focusing on subprime has left Santander Consumer's charge-off rate on auto loans much higher than that at other banks
Source: Bloomberg

Analysts' opinions have soured on the firm, including most recently a Barclays downgrade in July that left Santander Consumer with only six ratings equivalent of "buy" among the 19 firms tracked by Bloomberg. Its average 12-month price target has been cut almost in half over the past year to $15, which still represents an optimistic return potential of almost 28 percent. 

It's easy to imagine Santander Consumer shares getting a nice pop once the company is able to release its second-quarter report and any restatements that are needed to previous periods, presuming there's not a lot of new, worrisome information in them.

But in the longer term,  CEO Jason Kulas has his work cut out for him in taking down all those red flags. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Michael P. Regan in New York at

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Daniel Niemi at