Sezzle share price in focus as Discover Financial invests $30m

We examine Sezzle's latest market release titled 'Discover Invests US$30m - Plans for BNPL Network Solution'.

ASX-listed BNPL stocks faced heavy selling pressure on Wednesday, as news broke that tech behemoth Apple would be entering the space with its own installments product.

That product, tentatively titled Apple Pay Later, would be accessible through Apple Pay and focus on both short-term and longer-term installment payment options, according to reports from Bloomberg.

Despite those competitive concerns, on Thursday the Sezzle share price surged, during the session revealing that US-based Discover Financial Services (NYSE: DFS) had made a USD$30 million investment in the company.

By mid-afternoon on Thursday, Sezzle (ASX: SZL) was up 51 cents or 6.41% to $8.47 per share, taking the stock’s YTD gain to ~35%.

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Overview of the deal

There were two core components to the Discover announcement beyond the USD$30 million investment.

One, it was revealed that Sezzle and Discover were poised to enter into a partnership aimed at rolling-out a BNPL 'network solution on the Discover Global Network.' That partnership was subject to the completition of a yet-to-be finalised commercial agreement. Two, a referral program with Discover was also announced, aimed at introducing Sezzle customers to Discover’s credit and debit products.

Looking at the specifics of Discover’s investment, some 4.5 million shares are set to be issued as part of Sezzle's existing placement capacity, at a price of AUD$8.83 per share.

The shares issued as part of the Discovery investment would rank equally to all other Sezzle shares. That stock is expected to be issued early next week.

Commenting on the investment announcement, Sezzle’s Chief Executive Officer, Charlie Youakim said:

'We’re excited about our relations with Discover, as we believe our mission, vision, and values align.’

'Discover's capabilities via their network and financial products will enhance our own offerings and provide more paths to financially empower our consumers,’ Mr Youakim elaborated.

Discover’s profile

So who exactly is Discover? A US-based, diversified financial services company, Discover Financial Services (NYSE: DFS) offers digital banking services, credit cards, loans (personal, student and home) and savings accounts.

Speaking to the size of Discover’s operations, at its most recent quarter, the company reported total revenues of $2.7 billion, against net income of $1.5 billion or EPS of $5.04 per share. This performance was made against total loans for the close of the first quarter of $86.3 billion.

Commenting on those quarterly results, Discover’s CEO, Roger Hochschild, said:

‘Our first quarter results were characterized by sustained strong credit performance, robust sales growth, and solid execution on operating and funding costs. These results highlight that our value proposition continues to resonate with consumers, and underscores the efficiency and capital generation of our digital banking model.’

YTD the Discover Financial Services share price is up 37%.

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