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Sezzle share price soars 82% during today’s IPO

A promising growth story and the prospect of grabbing a slice of America’s $6 trillion retail market likely contributed to the overwhelming investor enthusiasm during Sezzle’s opening two hours of trade.

Sezzle, the buy now pay later (BNPL) provider officially listed on the ASX today at noon.

Investor enthusiasm reached fever pitch in the afternoon session, with the Sezzle share price rising 82% above its IPO issue price in under two hours.

Speaking of today’s listing, Sezzle’s Executive Chairman and CEO, Charlie Youakim said:

‘In becoming an ASX listed company, we are extremely proud to have attracted the support of our IPO investors, including many institutional investors who possess an extremely detailed understanding of the 'buy now, pay later' sector and the immense opportunity ahead for Sezzle.'

The buy now pay later gold rush intensifies

Sezzle has now joined a growing list of companies fighting it out to gain market share in the fledgling BNPL space.

The ASX itself is becoming crowded with buy now pay later providers: currently counting Afterpay Holdings Limited (ASX: APT), Zip (ASX: Z1P), Splitit Payments Limited (ASX: SPT) and now Sezzle (ASX: SZL) amongst its members – with a cumulative valuation in excess of A$7 billion.

What’s behind the run: a $6 trillion prize

The exponential rise of these buy now pay later companies – Afterpay in particular – is hardly surprising when you consider that the total value of retail sales in the US hit $6 trillion in 2018.

Most promisingly, in a media release issued this morning, it was noted that Sezzle’s 'key operating metrics continue to trend strongly in a positive direction.'

Indeed, with Sezzle now boasting partnerships with over 5,000 merchants, an active user-base of 429,000 people, and a number of stratospheric growth figures, it is not wholly unsurprising that we saw Sezzle’s share price skyrocket 82% during its first few hours as a public company.

Ultimately, the potential for Sezzle to grab even a small stake of America’s $6 trillion retail market – which the company is primarily focused on – represents a massive opportunity by any metric.

Sezzle processed an impressive $41.9 million of underlying merchant sales in the 2019 June quarter. Which was up from $1.6 million from the 2018 March quarter – an increase of 2,518%.

With such growth in mind, it looks unlikely that Sezzle’s limited operating history, financial losses, or the potential for further capital raises will deter investors.

Afterpay for example has continued to post losses and raise capital as it pursues a growth at all costs strategy – something that is common amongst early-stage tech companies.

That has done little to dampen investor appetite for the stock – with Afterpay’s share price rising 72% in the last six months alone.

The buy now pay later sector going forward

Sezzle’s potential success, or any BNPL provider for that matter, underscores the fact that it looks unlikely this market will be a zero-sum game, dominated by only one or two key players.

The value propositions of Sezzle, Afterpay, Zip and Splitit all differ in a number of key respects – providing different benefits to both businesses and consumers.

As of 1:30 AEST, shares in Sezzle reached A$2.230 per share – a 82% increase on the initial issue price of A$1.22.

The company will report its interim results for a December financial year, on August 30.

To discover the top 3 things you need to know about Sezzle, click here to read our pre-IPO article from yesterday.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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