Why the shares of Afterpay rival Openpay are up 840% since March

The Openpay Group Ltd (ASX:OPY) share price has rocketed a massive 840% higher since hitting a low of 32 cents in late March. Here's why…

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The Openpay Group Ltd (ASX: OPY) share price has been an incredible performer over the last two and a half months.

Since crashing as low as 32 cents on 23 March, the Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) rival's shares have jumped a whopping 840% to $3.02.

Why is the Openpay share price rocketing higher?

Investors have been buying Openpay and other buy now pay later providers in recent weeks for a number of factors.

One is the belief that the pandemic has accelerated the rapid adoption of the payment method due to retail spending shifting online during the lockdowns.

Both Afterpay and Zip Co have reported stellar sales and customer growth throughout the pandemic. And this has come without any notable deterioration in bad debts. This appears to have convinced the market that their business models are more robust than first believed.

Openpay has also reported strong growth of its own. During the third quarter the company reported a 203% increase in active plans, a 113% lift in active customers, and a 63% jump in active merchants on its platform. This strong form continued in May.

Its active merchants now include the likes of Bunnings Warehouse, Bupa, JD Sports UK, Repco, Smiggle, and Spotlight.

But Openpay's shares won't be building on its strong gains today. This morning the payments company requested a trading halt.

Why are its shares in a trading halt?

It appears as though management has decided to take advantage of its incredible share price gain to raise capital.

No details have been released officially by the company, but the AFR is reporting that Openpay is seeking to raise $30 million to accelerate its expansion in the UK market and strengthen its balance sheet.

According to the report, the company is aiming to raise the funds at $2.40 per share, which represents a 20.5% discount to its last close price.

These certainly are exciting times for Openpay and the buy now pay later space in general.

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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