The Afterpay Touch Group Ltd (ASX: APT) share price is running out of puff in after lunch trade as the stock surrendered some of its morning gains.
The Afterpay share price is up 1% at $13.11 at the time of writing after jumping as much as 10% before its annual general meeting (AGM) commenced.
But a gain is still a gain, especially when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is struggling to keep its head above water today.
The early gain was driven by a relief rally from the ASIC review into the industry, which didn't recommend any new legislation for buy-now-pay later service providers.
Instead, the regulator recommended extending its product intervention powers to regulate the industry.
Lower regulatory risks
This was what Afterpay management and shareholders were hoping for as critics of the company believed that new laws were needed to protect vulnerable consumers from predatory consumer credit providers.
However, the company pointed out that 93% of transactions through the Afterpay platform incur no late fee and more than 75% of its users have never incurred a late fee.
More importantly, Afterpay stops users who have even one late payment from using the service and that prevents consumers from slipping further into debt.
Users do not pay anything to use the service as it's the merchant that pays a commission to Afterpay. The service is only meant for small purchases with the average outstanding balance on the site at $121 compared to the average balance on credit cards at $4,268.
The ASIC news had also given Afterpay's peers an early boost with the Zip Co Ltd (ASX: Z1P) share price and FlexiGroup Limited (ASX: FXL) making early gains before a bout of afternoon weakness.
What's driving the share price weakness
It's usually hard to pin-point one factor that triggers a sell-off but there could be two reasons contributing to the partial retracement of Afterpay's share price.
The first is realisation that the sector isn't out of the regulatory woods just yet. The is still a senate enquiry to contend with even though it's largely looking at pay-day lenders.
Another potential reason is the outlook commentary at the company's AGM.
Management noted that the Christmas trading period is going better than expected for the group but shareholders may have been hoping for more bullish news (particularly on the US rollout) or some quantitative guidance on sales and profit.
Investors aren't an easy bunch to please.
