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Implications of Sezzle's $86.3 million capital raise

We examine the key highlights and implications of the company’s just-announced capital raise.

Sezzle share price rises on BNPL rush

Following a dramatic trading session which saw the company’s stock run ~40% higher, Sezzle (SZL) on Friday morning announced the details behind a $86.3 million (~US$60 million) capital raise.

Though an expected move at these price levels, that capital raise announcement caps off an explosive period of growth for the young company – both in terms of share price performance and underlying fundamentals. Indeed, since the lows it recorded in March, the stock has risen a staggering 1,885% off its last traded price.

Not only that, but as part of the company’s latest second quarter results, Sezzle reported impressive growth across all of its key metrics, with underlying merchant sales rising 349%, merchant fees gaining 397.1%, while active customers on the platform reached 1.48 million.

At the stock’s last traded price, Sezzle has an implied market capitalisation of $1.25 billion.

Details of the capital raise

Centrally, the $86.3 million raise: made up of a fully-underwritten $79.1 million institutional placement and a $7.2 million share purchase plan (SPP), for eligible investors. The funds from the raise will be used to accelerate the Sezzle’s growth profile, the company said in a statement to the ASX.

Under the institutional portion of the raise, Sezzle plans to issue some 15.8 million new shares (CDIs) – representing 8.9% of the company’s issued capital – at a floor price of $5.00, a significant discount to the stock’s last traded price.

Ord Minnett is acting as the lead manager of the raise.

By comparison, under the SPP, eligible investors would be able to apply for upto $30,000 worth of Sezzle’s stock.

'CDIs under the SPP are to be used at the price paid by investors under the Placement,' it was flagged.

CEO comments and uses of the funds

Reflecting on today's capital raise announcement, Sezzle's CEO, Charlie Youakim said in a statement to the ASX:

'Our strong 1H20 performance, improving consumer profile, and confidence in reaching an annualized run rate for UMS of US$1 billion (A$1.4 billion) by the end of 2020 allows us to be uniquely positioned to further expand through a number of near-term growth initiatives.

Mr Youakim went on to say:

'Importantly, this capital raising will give us the ability to invest in these initiatives as well as fortify tour balance sheet.'

In a statement to the ASX, Sezzle’s management noted that the funds would primarily be used to accelerate the company’s growth trajectory.

Specifically, the company intends to use the funds from the raise to increase its sales and marketing capacity, build out its staffing and improve the platform, as well as pursue international expansion opportunities, including flagging the ‘low cost testing’ of other markets.

Elsewhere, around 13% of the funds from the capital raise would be used to strengthen the company’s balance sheet, it was noted.

The company expects its trading halt to be lifted – following the institutional bookbuild – this Monday, 13 July.

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