Australian buy now, pay later company Afterpay suffers $345 million loss

The company has dramatically fallen from grace following another embarrassing pummelling to its finances just months after a $39 billion merger.

Australian buy now pay later tech giant Afterpay has posted a staggering mid-year loss just months after being acquired for $39 billion.

The Aussie company’s first results since being taken over by US company Block left a lot to be desired.

Afterpay recorded a net loss of $345.5 million over the six months to December 31, 2021.

That’s a considerable decline from its previous half-yearly results, where it shed $79.2 million in the first half of 2021.

In all, that means the company’s losses ballooned by 336 per cent.

Block Inc, which has absorbed Afterpay, is currently suffering a hit to its share price, which at time of writing is trading at $164.11, representing a 0.22 per cent fall.

Since Block forked out billions to acquire Afterpay and finally completed the takeover in January, its share price has dropped by 6.9 per cent.

Afterpay chalked up $176.7 million in losses from taking on bad debts.

Other operating expenses soared nearly 287 per cent from $63 to $212.3 million.

Those operating costs included rising marketing fees as well as taking a hit to its Clearpay business over in the UK.

However, with more losses also came more gains.

The fintech also raked in more income than ever before – going up by more than 55 per cent to $645 million over the past six months.

That is up from the $417 million income amount recorded for 2020.

The company has been struggling over the last 12 months.

An image of someone using Afterpay. Photographer: Brent Lewin/Bloomberg

Ex-neighbours and now co-CEOs Nick Molnar and Anthony Eisen started Afterpay in 2014, based on the idea that Millennials prefer cashless and credit-free lifestyles.

In August last year, the co-founders announced an acquisition with US digital payments company Square to the tune of $A39 billion, making it the biggest merger in Australia’s history.

Twitter founder Jack Dorsey is the CEO of Square, but has since renamed it Block.

In February, Block warned that Afterpay’s earnings growth would be less than they thought when they acquired the company.

Afterpay’s growth was predicted at 70 per cent, but Block tamped down the excitement by saying it was more realistic to see the company expand at around 25 to 30 per cent.

“They’ve paid $US23 billion too much for it,” McLean Roche Consulting founder Grant Halverson told The Australian Financial Review.

“These results are horrendous.”

CEO of Twitter Jack Dorsey also bought Afterpay, through another one of his companies – Block. Picture: Jim Watson/AFP

Experts have warned of the potential “carnage” for the buy now, pay later sector as providers burn through cash, bad debts balloon and customers retreat from using the service – a model which they say isn’t sustainable.

News.com.au earlier reported that the buy now, pay later (BNPL) sector is valued at more than $30 billion collectively, but currently the Australian market is saturated.

There are 12 BNPL providers listed on the Australian Stock Exchange – the most anywhere in the world – and the overcrowded market is forecast to undergo a major shake-up this year.

Overall, the sector lost a whopping $1.05 billion in 2021, which has left investors concerned and has seen share prices dive.