‘We listed too early’: ASX-listed BNPL player Splitit to delist, relocate to Cayman Islands

Shares in the buy now, pay later player soar following $50m funding injection deal, and decision to relocate to the Cayman Islands.

Splitit share soar after the buy now, pay later provider signed an agreement for $US50m ($77.5m) in funding from private equity group Motive Partners, in a deal that will see it delist from the ASX and redomicile to the Cayman Islands.

Splitit has to date been undervalued as a listed company, according to its chief executive Nandan Sheth, who said as a private Cayman Islands company it will benefit from a simplified corporate structure and a more flexible operating environment, as well as improved prospects of accessing future capital.

Unlike other buy now, pay later providers, Splitit uses a customer’s existing credit from a credit card issuer, and offers a white-labelled product to merchants rather than dealing with end consumers.

“It has been difficult to secure growth capital to meet the long term needs of Splitit especially as a micro-cap publicly traded company on the ASX,” Mr Sheth said in an interview.

“I think the ASX has been a very positive home for Splitit, but I think the issue is when you have a frothy market like buy now, pay later, and you’re trying to differentiate in that market, it’s hard for the market to separate an instalment SaaS from any other BNPL,” Mr Sheth said.

“To be super honest with you, I think we had been a little premature to go public. That’s very easy for me to say that because I wasn’t here when we went public.”

Splitit CEO Nandan Sheth. Picture: Supplied

Splitit shares rallied as much as 25 per cent to 9.5c on the ASX early Wednesday morning, before coming off the boil. They are up 2.6 per cent at 7.8c in mid-afternoon trading.

The proposed $US50m deal consists of two $US25m tranches in exchange for the issuance of new preference shares.

Shareholders will vote on the Motive proposal in late October or early November, which values Splitit at US20c a share, a significant premium on its share price of 7.6c when it was suspended from trade on Monday.

“We want to drive more profitable, top-line growth with the largest merchants in the world,” Mr Sheth said.

“Frankly, one of the impediments to getting more merchants was our balance sheet, and [the deal] solves that problem.

“I firmly believe that consolidation will continue in the BNPL sector, I think some of the major players have already started to pivot to become more of an online shopping mall, and a price comparison engine and not a BNPL.

“I think that’s a really good move, because the structure and the model of BNPL as it exists today, with significant write-offs and significant marketing costs and elements around registering and acquiring new consumers, is a hard financial story to tell to investors.”

Mr Sheth added that specialist fintech investor Motive Partners was Splitit’s first choice as an investment partner. Motive Partners was contacted for comment.

“We are delighted to secure this significant capital commitment from a world-class private equity sponsor,” Splitit chair Dawn Robertson said.

“Motive is the ideal partner to help us drive future value creation due to its extensive payments expertise, value-additive capabilities, and deep industry relationships. The board unanimously concluded that the proposed transaction represents the best available opportunity to create long-term value for Splitit’s existing shareholders.”