Afterpay rival Sezzle is set to join the growing crowd of buy now, pay later providers on the ASX this month after its initial public offering formally closes on Friday.
The controversy surrounding Afterpay, and the potential entry of payment giants like Visa to the instalment payments sector, did nothing to dissuade institutional investors from paying $1.22 a share as part of the front end bookbuild process by Ord Minnett which raised $43.6 million to fund its expansion.
The float does not look cheap on financial metrics: the IPO values the company – which generated $US1.41 million in fees from retailers over the 12 months ending March 31 – at $217 million, including a $56 million cash balance.
The risks of this business model are also clear with “uncollectible accounts” totalling $US940,000 for the year. It means bad debts accounted for more than half of Sezzle’s revenue, although the company says this number is falling as a percentage of merchant revenue.
But Mr Fergie said the key metrics to look at were the 3321 active merchants it had signed up as of March 31, and 270,000 active customers.
“That’s not an insignificant starting point,” he said.
The Minneapolis-based Sezzle can claim some points of difference with Afterpay’s local clones: It is pursuing its home US market, which had a retail spend totalling $US4.3 trillion last year with more than $US500 billion spent online. Sezzle has also now entered the Canadian market.
“While the Canadian credit market differs from the US credit market, we believe online shopping behaviour is similar in both countries and that we will see similarly rapid adoption of instalment payments as a preferred checkout option,” said Sezzle chief executive and co-founder, Charlie Youakim.
Mr Youakim and other current investors are not selling any shares in the float which will value the founder’s stake at more than $100 million.
Sezzle is also making strong gains in its US home base.
The prospectus reports that underlying merchant sales rose from $US1.6 million in the March quarter of 2018 to $US28.3 million in the March quarter of this year and returning customers accounted for 73 per cent of its orders for the March quarter.
This article was first published by The Sydney Morning Herald. Read the original here.
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