Losses for buy now, pay later (BNPL) investors have mounted as increasing competition and rising inflation and interest rates have seen stock prices plunge.
Those who took part in the Beforepay Group (B4P) IPO have been struck by the greatest losses of any new ASX listing so far this calendar year.
Investors jumped on the opportunity to take a piece of the BNPL fintech boom, which spanned more than a year after COVID hit in March 2020.
But believers in Beforepay Group’s story – who chipped in a total of $35 million to the company’s IPO with shares priced at $3.41 – have lost a big chunk of their investment, with shares today trading at 32.5c.
The ASX was already flooded with BNPL options: Afterpay led the way before being taken over by Block Inc (SQ2) (formerly Square), Sezzle Inc (SZL), Zip Co (ZIP) and Openpay Group (OPY) were also playing in the space. Then traditional lenders, the mainstream banks decided they better get in on the action: Commonwealth Bank launched StepPay in mid-August last year, NAB joined in during July and ANZ Banking Group partnered with Visa to allow customers to pay in instalments.
Competition aside, soaring inflation and interest rates also tipped BNPL stocks over the edge and their values came crashing down.
In the months since its mid-January debut, Beforepay Group has shed nearly 90 per cent of that $3.41 IPO price.
Block Inc is down about 60 per cent from its highest trade over the past year and sits below $84; Openpay is down 87 per cent on its 52-week high; Sezzle, more than 90 per cent; and, Zip Co nearly 92 per cent.
Whilst the companies have varied products and niche market offerings, the future of these stocks will be impacted by what happens with inflation and interest rates, which in turn affects their debt positions and that of their customers.
In its FY22 results, Beforepay Group reported its pay advances had risen 252 per cent to $327.3 million and its income was up by 240 per cent year-on-year to $15.3 million.
CEO Jamie Twiss said Beforepay delivered a strong performance, despite its $29 million loss.
“Pay advance volume is up sharply, defaults are much lower, and net transaction margin is now positive, putting us in a strong position to continue our path to profitability,” he said.
B4P shares ended the day 7.14 per cent in the red at 32.5 cents.