Tech group Openpay collapses, shuts down platform

The tech company is the latest buy now, pay later provider to fail in what was once one of Australia’s hottest sectors.

Openpay boss Dion Appel. Picture: Supplied

ASX-listed buy now pay later provider Openpay has collapsed and its platform has been shuttered, with McGrathNicol appointed receivers to the company that has become the latest victim in the once-shining sector.

McGrathNicol partners Barry Kogan, Jonathan Henry and Rob Smith were appointed receivers and managers on Saturday, pursuant to the security held by OP Fiduciary.

The control of assets, operations and trading activities of the company, whose shares entered voluntary suspension on Friday, now rests with McGrathNicol.

The group said it will work closely with Openpay’s employees, merchants and customers “to urgently determine the appropriate strategy for the business.”

“At this time, customers will no longer be able to use the Openpay platform for new purchases, but are still required to pay any outstanding balances in accordance with their existing agreements,” it told investors.

“It is expected that the shares in the company will continue to be suspended until further notice while the assessment of the appropriate strategy is ongoing. A further announcement will be issued in this regard in due course.”

Separately, the group announced Yaniv Meydan resigned as non-executive director on Saturday.

It comes just one week after rival New Zealand BNPL provider Laybuy announced it would delist from the ASX, with its shares last priced at 3.3c, down from a September 2020 IPO price of $1.41 a share.

Australia’s buy now, pay later companies were once some of the strongest performers on the ASX, amid low interest rates and strong demand for e-commerce during the pandemic, but a growing number have collapsed amid rising interest rates.

The Melbourne-based Openpay listed on the ASX under ticker code OPY in 2019 when it raised $50m in an IPO at a price of $1.60 per share, valuing the company at $150m.

It last traded at 20c per share, giving it a market capitalisation just above $45m. According to its most recent financial filings Openpay ended the December quarter with a cash balance of $17m, and had torn through $18m over the previous three months.

Its customers include Bunnings, Officeworks, Spotlight and Kogan, as well as health providers like Bupa Dental and Smile Solutions.

“We’ve had an exceptional few months,” Openpay’s then-chief executive Michael Eidel told The Australian when the company listed in 2019. “We’re heavily oversubscribed, which gives us a lot of hope for listing day and the development of the share price.

“We’ve had great feedback and confidence that our differentiated approach really works.”

Mr Eidel said at the time Openpay’s point of difference could be found in its anti-fraud, credit check and customer identification technologies, that mean the platform is robust in a way its rivals are not.

“Our intellectual property means we’re the leading tech platform, that’s a real differentiator,” he said.

He added that Openpay generally has different customers and merchants to the likes of Afterpay, and said that the company stands for “buy now, pay smarter”, given it’s trying to be responsible with its product offering.

Afterpay was the beneficiary of Australia’s largest ever acquisition in 2021, when it sold to tech giant Square for $39bn.

Afterpay co-founders (L-R) Nick Molnar and Anthony Eisen.

“Retail makes less than half of our business,” Mr Eidel said. “We’re focused on specialist industries like healthcare, automotive, and home improvement, and quite often we are the sole provider there or only one of two, which definitely gives us a competitive edge.

The company didn’t charge interest but instead made money from establishment fees, which it charged on purchases over $1000, and plan management fees for the end customer.

“We want to become a renowned global brand in this fast-growing space,” Mr Eidel said in 2019. “We’re doing that in Australia and expanding into promising international markets like the UK.

Openpay’s current CEO is Dion Appel, who told The Australian in a previous interview that Openpay’s customers weren’t Millennials, but 30 to 40-year-olds.

“They’ve got jobs, houses, cars, pets, and possibly young children,” he said.

“They’re asset rich but sometimes cash flow poor. We’re able to provide a solution to enable them to live the life they want to live within their means, giving them more time to pay.”

Markets analyst Josh Gilbert, of trading platform eToro, said the BNPL sector has gone from “hero to zero” among investors in recent months.

eToro markets analyst Josh Gilbert. Source: Supplied.

“As inflation climbed and interest rates soared, share prices crumbled. Disruptive tech especially has felt the full force of liquidity being drained for financial markets over the last two years as investors rotated out of risk assets,” Mr Gilbert said.

With competition rife in the marketplace and increasing regulation – plus disadvantageous conditions in the macro environment — there were unfortunately always going to some businesses that would succumb to the pressure.

“Block, formerly Afterpay, has the power of billions of dollars of diversified revenue and is set to post a profit for 2022 when it reports fourth-quarter earnings. This is the contrary to circumstances for other Australian BNPL names that some investors view as one-trick ponies. These other companies may struggle as economic growth continues to slow.”

Openpay was contacted for further comment.