- Buy now, pay later competitor Sezzle has recouped a big chunk of 2020 losses after a California licence scare
- The company had a lending licence rejected by the California Department of Business Oversight at the end of 2019
- This triggered a mass sell-off as shares slipped almost 35 per cent from the start of the year until yesterday
- Today, however, Sezzle said talks with the department were fruitful and its hopeful its application will be approved soon
- As a result, shares are up almost 30 per cent before midday and selling for $1.73 each
Afterpay rival Sezzle (SZL) has shared a hopeful update with the market after a California licence rejection caused a mass sell-off at the start of the year.
The company told investors today it is confident the decision to deny the licence will soon be overturned based on company discussions with California state representatives.
Sezzle’s shares shaved off 73 cents and slipped almost 35 per cent from the start of the year until yesterday. The decline came after the California Department of Business Oversight (DBO) denied the lending licence application on the basis of the company performing “illegal unlicensed lending in the state”.
Essentially, the department said the Sezzle business model is in violation of the California Financing Law. While the licence rejection does not stop Sezzle from operating in California, it does hinder the business from simplifying operations by cutting out a financing middle-man.
Nevertheless, Sezzle’s position was that it does not operate as a lender but under a different financing model as a sales company. It had 15 days to appeal the decision and immediately started talking with the California DBO to get things worked out.
Strengthening Sezzle’s case was the fact that buy now, pay later poster-boy Afterpay — which operates under a similar business model to Sezzle — was granted the lending licence in November 2019.
Afterpay confirmed in a response to ASX queries about Sezzle’s rejection that its licence was the same one applied for by Sezzle.
Today, Sezzle said it believes the discussions with California DBO representatives were fruitful.
“Based on those discussions, Sezzle is confident that we have a path to resolution in creating a successful application for a State of California Finance Lender License,” the fintech company said in its announcement to the ASX.
The company said it will continue to update investors on any further developments.
The market scrambled to buy back the shares it sold in last week’s share, with Sezzle shares gaining almost 30 per cent before midday. While not quite at 2019’s closing price, shares in Sezzle are currently worth $1.73 each in a $136.55 million market cap.