The Sezzle Inc (ASX: SZL) share price leapt as much as 80% following its ASX initial public offering (IPO) today.
What Does Sezzle Do?
Sezzle is a US-based and incorporated business, which provides an interest-free instalment payment solution.
Sezzle has been operating since 2017 and is now in 12 countries. It listed on the ASX with an initial public offering price of $1.22 per share/CDI. Sezzle does not charge interest or initiation fees, however, it does charge failed payment fees of US$10.
With a listing price of $1.22, Sezzle’s share price climb to $2.17 means it has risen some 78% on the first day (at the time of writing).
Sezzle has been growing strongly in recent times. At 31 March 2019, the company had 3,321 active merchants, mostly in the US, with 269,820 ‘active’ customers. In 2018, Sezzle’s total income grew by an average quarterly growth rate of 101%.
Sezzle noted that merchant/retailer fees as a percentage of merchant underlying sales were 4.8% and 3% in FY18 and FY17, respectively.
Sezzle will be focusing its efforts and money on growing in the small and medium business segment, expanding the team for enterprise merchant accounts, growing in Canada, growing its in-store capabilities and improving its ‘fraud and decisioning models’.
Obviously, a key part of the company’s growth will be how many transactions it can actually fund. This IPO money will help somewhat, and being listed will give it more leverage to talk to lenders like banks.
Don’t Forget The Risks!
The company’s shares have got off to a great start, but there are plenty of risks. It is much smaller than its peers like Afterpay Touch Group Ltd (ASX: APT), doesn’t have much trading history and one of the stated risks in the prospectus is the “the ability to turn the net transaction margin into a positive percentage.”
Financial disclosure: At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.