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Date : 11/02/2023

OpenPay Group Ltd (ASX: OPY) collapses on the ASX after 3 years of listing

OpenPay Group Ltd (ASX: OPY) is an ASX-listed financial technology company that offers a range of payment and financial services to businesses and consumers in Australia. It provides merchants with payment processing solutions and instalment plans for customers, enabling them to make purchases over time. The company was founded in 2013 and is headquartered in Sydney, Australia.

The company aims to make it easier for people to manage their finances and make payments flexibly and conveniently.

Openpay is amongst the latest BNPL companies to see a huge decline right after releasing its 2023 second-quarter results. Openpay shares are currently on a trading halt after their shares plunged heavily in the market.

How OpenPay Shares were performing after its Debut on the ASX

So the company was listed on the ASX recently in 2019 at an IPO price of $1.6 per share. Soon after one year, around the end of 2020, Openpay share price touched an all-time high of $4.70 per share and was considered a hot stock in the BNPL sector. There were a couple of reasons for this upward trend. One was the usage of BNPL services by the customers during the pandemic, and the second AfterPay was doing good business in the sector. Following the suit, the market was speculating a boom in the BNPL sector, and as a result, BNPL shares were in high demand.

But within two and a half years, the bubble burst, and BNPL shares declined. Currently, Openpay shares are trading at 20 cents apiece before it went on a trading halt.

So let’s discuss what went wrong with Openpay that caused its stock to decline.

What went wrong with Openpay?

Openpay stock went on a trading halt soon after it released its quarterly report on 31 January. A loan covenant was broken when the firm failed to pay the utilisation notice. Administrators were named on a Saturday morning; thus, negotiations for the remainder of the week seemed fruitless.

The total transaction volume (TTV) for the second quarter of FY2023 was $126 million, an increase of 45.9% over the same period a year earlier. Revenue increased by 59% to $10.1 million during the quarter. The number of active plans increased by 40% to 2.1 million, while the number of active consumers increased by 15% to 347,000.

Openpay stock and other ASX BNPL stocks skyrocketed in the first months of the market’s spectacular epidemic recovery. However, it could not sustain its late 2020 highs and came under significant stress as interest rates rose in the middle of 2022.

It seemed that Openpay needed help drawing down on its $41 million in available financial options, leaving it with a negative balance of $17 million. This is a significant decrease compared to the previous reported quarter’s cash burn of $18 million.

Openpay’s shares are on a trading halt, and its platform is still suspended.

Nandan Sheth, CEO of Splitit, has said that the firm operates uniquely since it uses its customers’ available credit from their credit cards. More often than not, it deals directly with sellers instead of buyers.

The overview of BNPL stocks on the ASX

Here is a look at the performance of the ASX BNPL leaders over the last year in terms of share price returns:

  1. Block Inc (ASX: SQ2), which bought Afterpay in January of 2022, has seen a 16% drop in its stock price.
  2. Zip Co Ltd (ASX: ZIP) shares plummeted by 78%.
  3. MoneyMe Ltd (ASX: MME) shares have dropped by 85%.
  4. Sezzle Inc. (ASX: SZL) shares have fallen 72%.
  5. Splitit Payments Ltd (ASX: SPT) shares fell 2.5%.

ASX BNPL industry boosts the Aussie economy

The ASX BNPL market isn’t dead yet, so don’t write it off. The buy now, pay later sector is estimated to have contributed more than $18 billion to Australia’s gross domestic product, as reported by the Australian Finance Industry Association (with credit to The Australian). According to statistics provided by AFIA, 6.3 million people are using BNPL services in Australia.

Diane Tate, the chief executive officer of AFIA, said that “BNPL is low cost and low risk, and the average transaction value for BNPL is $136.” “Consumers can save money on interest and fee charges (compared to other financial products) and surcharge savings. The postponement of payments enables more accurate and efficient planning.

Conclusion

The end of OpenPay comes a week after Laybuy (ASX: LBY) said it was leaving the stock market. AfterPay was delisted from ASX around 18 months ago after being purchased by the financial technology company Block (ASX: SQ2).

Investors should know that OpenPay was never profitable and relied on external financing to stay afloat. Unfortunately for the company’s external lenders, the company’s efforts to become profitable had come too late. Companies that aren’t making money, particularly those trying to ride the wave of a temporary fad, should raise red flags for any investor.

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