Buy now, pay later rollercoaster as regulation looms large over sector

Australia’s buy now, pay later stocks have continued their wild ride up and down the bourse.

Splitit chief executive Brad Paterson. The compay’s shares are up about 300 per cent since the end of May.

Australia’s buy now, pay later stocks have continued their wild ride up and down the bourse, with Sezzle tumbling nearly 10 per cent but Splitit climbing 3 per cent as a decision about future regulation looms large over the sector.

Splitit reported its 2019-20 half-year results on Monday, lifting its merchant sales volume by 133 per cent year on year to $US89.1m. The company’s gross revenue jumped 244 per cent year on year to $US3.1m, while its average order was up 59 per cent to $US845.

Unlike Zip and Afterpay, which are based on new debt, Splitit connects to an existing Visa or MasterCard credit card, and has deals in place with online payment providers such as Stripe. The company has also signed on retailers including The Hut Group, Specialized, Frederique Constant, Echelon Fitness and 77 Diamonds.

The company said its active merchants had jumped by 92 per cent in the past year to 519, while monthly active shoppers were up by 28 per cent to 149,000.

However, its net loss also widened by 134 per cent to $US9m as the company embarked on global expansion. In August, Splitit announced a $100m capital raising from institutional investors including US-based Woodson Capital.

“Splitit’s value proposition for merchants and consumers has proved to be relevant now more than ever. This, coupled with strong execution of our high-growth strategy, has helped us deliver record merchant sales volume and revenue in the half-year,” Splitit CEO Brad Paterson said. “The momentum is continuing into the second half.”

Investors welcomed the numbers, sending shares in Splitit up 1.64 per cent to close at $1.86 — up about 300 per cent since the end of May. The company did not pay a dividend.

It was a different tale for market rival Sezzle, which fell despite the company tripling its customers and quadrupling its income year on year.

Sezzle, which is based in New York but listed on the ASX, posted underlying merchant sales (UMS) growth of 338 per cent to $US307.4m, and total income up 384 per cent to $US20.8m for the half-year ending June 30.

Active consumers grew by 243 per cent year to 1.5 million, while active merchants on Sezzle’s platform climbed by 219 per cent to 16,100. Active users were up 243 per cent to 1.5 million, while active merchants were up 219 per cent to 16,100.

In July, Sezzle announced it would raise $86m in fresh capital to capitalise on the BNPL boom and strengthen its balance sheets.

“We are fortunate to be able to provide merchants and consumers the payment flexibility they need in this unprecedented global pandemic of our lifetime. The utility of Sezzle is evident in our record 1H20 performance and strong start to 3Q20 in July,” Sezzle CEO Charlie Youakim said.

“We are pleased to reiterate our guidance of achieving an annualised run rate target of $US1bn in underlying merchant sales by the end of 2020.”

Investors were expecting stronger numbers, however, and shares fell 9.44 per cent to $10.27.

Openpay also fell, dropping 8 per cent to $4.32 after posting its full-year numbers. The company’s active plans grew 229 per cent, while active customers were up 141 per cent, and active merchants were up 52 per cent. Losses widened to $36.5m before tax, from a loss of $14.3m a year earlier.

“The COVID-19 pandemic has merely accelerated the adoption of BNPL across a much higher proportion of consumers,” Openpay chairman Patrick Tuttle said.

Market leaders Afterpay and Zip hit new records last week.