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Sezzle shares pile on 78% five days after ASX debut

A week after Sezzle’s high-flying Australian IPO, here’s how the buy now pay later company fared.

When PayPal Holdings Inc (All Sessions) was first trying to establish itself, so aggressive was the company’s growth strategy that they handed out $20 dollars to anyone who’d sign up to the platform.

Sezzle Inc, the fast-growing buy now pay later (BNPL) company is in a similar, but different position. It’s growing both its customers and merchants aggressively, and like PayPal in the early days, it continues to burn cash and incur losses at a rapid-click.

Maybe most importantly though, investor enthusiasm around Sezzle is high. In the first week alone – and even as trade-tensions flared – shares in the fledgling BNPL company climbed 78% from their IPO issue price.

Here's how Sezzle's first week as a public company played out:

The Sezzle IPO in focus

Sezzle’s first day on the ASX was a dramatically positive one. With an IPO issue price of just A$1.22 per share, at its peak, Sezzle’s shares had more than doubled that – reaching A$2.58 per share.

Day two played out in mostly the same fashion, as a second-wave of investors caught news of the US & Canadian-based company. Sezzle’s shares were again bid higher by the close, reaching A$2.73 per share.

The next two days would prove less fruitful for the company, as Sezzle got caught between the US Fed’s decision to not pursue a ‘period of easing’ and Donald Trump’s bombastic declaration that America intended to impose further tariffs on China.

Predictably, investors sold off risk assets across the globe, with Sezzle’s share price suffering minor losses as a result. Even still, Sezzle closed the week out at A$2.39 per share – still 95% above the IPO issue price.

The US-China drama didn't end there. Trade tensions reached fever pitch Monday afternoon, as China is said to have asked buyers to halt US agricultural imports. The ASX 200 crashed in response, shedding 124 points by the close.

Sezzle couldn’t help but join in the losses, as it saw its share price tumble 8.79% as US-China relations soured.

What’s next for Sezzle?

Trade tensions aside, Sezzle has capped off a stellar week as a publicly traded company.

At the same time, Sezzle’s impressive early share price gains, though backed by similarly impressive growth, has likely left investors wondering just how high (or low) Sezzle’s share price can go.

For perspective, Sezzle’s current A$425 million market capitalisation comes off the back of just $1.6 million in total sales, for the 2018 financial year.

Though sales have increased considerably in 2019, reaching $2.1 million (when excluding end customer and other income), that still leaves the company richly priced by traditional valuation metrics.

Changing of the guard

A growth at all costs mentality has dominated early and not-so-early stage tech companies for some time now.

Indeed, as we noted in our first piece on the company, Sezzle typifies a fast-growing tech company. Here we said:

‘The company has seen underlying merchant sales rise from just US$1.6 million in the 2018 March quarter, to US$28.3 million in the 2019 March quarter – an increased of more than 1,600%’.

We further added that:

‘At 31 March 2019, Sezzle had over 269,800 Active Customers, an increase of more than 4,370% since January 2018.’

Whether Sezzle can continue such growth will be the question on many investors' minds.

Closing remarks

The PayPal anecdote at the start was not one without just cause. The payments giant now brings $4.3 billion in revenue and $823 million in net income.

Of course the point here was not that Sezzle Inc will become PayPal, or even experience comparable success. Rather, it was to illustrate that with new exciting markets – like the buy now pay later space – there is significant growth potential for early movers.

To read our cover of Sezzle's first day as a public company, click here now.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material 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 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. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research 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 and quarterly summary.

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