From hero to zero… well, 50 cents per share. The Splitit Ltd (ASX: SPT) share price has gone from ASX payments market darling to 'dog of the ASX' status in a bit over 4 months. The Splitit share price is (at the time of writing) going for $0.50 a share, down from the $2.00 mark the shares reached in early March this year.
If you had bought into the IPO in January, you would have seen your shares go from 20 cents to the $2.00 high in just three months (a gain of 900%) and now back down to a (mere) double-and-a-half of the IPO price. Talk about a roller-coaster. So, what happened to the Splitit share price?
What does Splitit do?
Splitit is a small payments company (worth $152 million at the time of writing) with a service that allows customers to pay for 'things' using existing credit cards, but under a buy-now-pay-later (BNPL) model. Customers can choose to 'split' the payments and pay up to 36 interest-free monthly instalments. In contrast with the 'original' BNPL company Afterpay Touch Group Ltd (ASX: APT), Splitit doesn't use its own payments network and slots in with Mastercard or Visa (or whoever is offering the credit facility).
IPO fever
Splitit definitely got caught up in payments madness. In January, the markets were full-steam ahead with 'correcting' the correction that had gripped global markets from October to Christmas last year. Afterpay was making waves with its phenomenal numbers out of the United States (US) and Zip Co Ltd (ASX: Z1P) was also attracting big money. With a cool name, a 'similar but different' product offering and a cash-flooded market, it was the perfect storm for a payments IPO to shoot the moon.
Should you split from Splitit?
A combination of cold water and hard numbers have dampened the fever over Splitit. When investors realised that Splitit wasn't going to become the next Afterpay anytime soon, many bailed, and when Splitit started releasing its numbers over this year, even more jumped ship. For the year ending 31 December 2018, the company brought in US$789,920 (yes, you read that correctly) and lost approximately US$4.64 million, which was up from the US $3.4 million loss for the 2017 year. Although gross profits were up, so were operating expenses (by a lot more).
Foolish takeaway
Until Splitit starts showing some knockout numbers and a clear path to profitability, I personally will be steering clear. I think Afterpay shows a lot more promise in the BNPL space and I think that the $152 million market cap is still quite high for a company bringing in under a million in revenue.
