The Splitit Ltd (ASX: SPT) share price plummeted 19.75% on the ASX on Wednesday to close at $1.30.
This comes after the Splitit share price touched a high of $2.00 on Monday marking a spectacular 1000% return in just over a month since floating on the ASX.
It appeared to be the IPO that had it all. A payment platform with a twist where shoppers can split their purchases into up to 36 interest-free monthly payments using their existing Visa or Mastercard. Successful predecessors like Afterpay Touch Group Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P). And let’s not forget a pun intended name.
The company recently announced its full-year results for the fiscal year ending December 31, 2018. The report highlighted a 203% increase in revenue to US$789,920 but a net loss of $4,405,459. This equates to a loss per share of 29.45 cents.
Given the company’s approximate market capitalisation of $280 million and 173 million shares on issue, this would place the company at x284 times CY18 revenue.
While it does sound all doom and gloom, the payment platform sector and Splitit are in its early days. Like many other successful and red-hot IPOs in the past, the Splitit share price has inflated miles past its valuation and experiencing one of many pullbacks.
A less extreme and recent example of a successful IPO imploding was Keytone Dairy Corporation Ltd (ASX: KTD).
Keytone was at the very least EBITDA positive and using IPO funds to expand existing production capacity for dairy-related products. The issue price was also A$0.20 each to raise a maximum of $15 million. The share price reached a peak of $0.870 in two months before finding some consistency around the $0.40 mark.
To those investors who are considering buying Splitit shares for a bounce or as a speculative buy, I would be avoiding the hype and bandwagon and taking a wait and see approach. In my view, it’s probable that the stock could continue to be sold down as investor interest dwindles.
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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.