The buy now, pay later (BNPL) sector is bigger than ever. According to Ibis World, the industry grew at 39.3% annually between 2015 and 2020. First emerging in 2011-12, Worldpay has also predicted the BNPL industry will double in the next three years. The sector has grown from 3% of all eCommerce payments in 2018 to 8% last year.
In 2019, there was a surge of BNPL IPOs. Splitit Ltd (ASX: SPT) was the first listing of the year. Sezzle Inc (ASX: SZL) debuted mid year and Openpay Group Ltd (ASX: OPY) listed just before Christmas 2019. Industry giant Afterpay Ltd (ASX: APT) listed in 2016 while competitor Zip Co Ltd (ASX: Z1P) listed back in 2015 as Zip Money Limited.
As the BNPL sector continues to experience rapid growth, we take a look at how ASX BNPL shares have performed since their IPOs.
Afterpay listed in 2016 at an offer price of $1 per share, giving the company a market capitalisation of $125 million. Shares are now trading at $69.81, meaning an investor at the IPO stage would be sitting on a 6881% return. Afterpay has grown into the largest of the BNPL providers by market capitalisation, and is now worth some $19.41 billion.
Afterpay reported underlying sales of $11.1 billion in FY20, an increase of 112% on the prior corresponding period. Underlying sales in the fourth quarter were $3.8 billion, 127% above 4Q FY19. This was the highest quarterly performance ever, reflecting the accelerating shift to eCommerce spending since the impacts of COVID-19 emerged globally.
Active customers reached 9.9 million in FY20, demonstrating the flight to online spending and attractiveness of the budget focused business model in the current economic environment. FY21 is expected to be a year of increased investment as the business looks to maintain strong momentum and capitalise on the opportunity to scale globally.
The first of the BNPL providers to list, Zip Co joined the ASX in 2015 issuing shares at 20 cents each. Zip shares are now worth $6.38, giving a 3090% return to IPO investors. Zip raised $5 million in its IPO but now boasts a market capitalisation of $2.49 billion.
Zip Co reported $2.3 billion in annualised transaction volumes in FY20, above its $2.2 billion target. Customer numbers increased to 2.1 million, a 63% increase year on year. Over the full year, Zip Co reported revenue of $161.2 million, an increase of 91% on FY19.
The company’s business model has been tested during the pandemic and has proven incredibly resilient. Transaction volumes and customer numbers have continued to grow, and customer repayment performance remained strong. In a July trading update, Zip CEO Larry Diamond said, “…our penetration into defensive, everyday spend categories delivered in spades”.
Splitit listed on the ASX in January 2019 at 20 cents per share. The company raised $12 million in its IPO which gave it a market capitalisation of $54 million. It now has a market cap of $519 million and shares trading at $1.46, meaning IPO investors have seen a 630% gain.
Splitit reported record growth in the June quarter with rapid growth across all KPIs. Merchant sales were US$65.4 million, a 260% increase on 2Q FY19. Average order value increased 44% to US$893 and total merchants increased 104% to 1,000 with large new merchants signing up.
Gross revenue increased 460% to US$2.4 million in the June quarter with demand from higher value merchants ramping up. Customers looking to make better use of their existing credit and the accelerated shift towards eCommerce as a result of Covid-19 are driving growth.
Sezzle listed on the ASX in July last year at $1.22 per share. At the time, the company had a market capitalisation of around $217 million. Now its market cap is nearly $780 million and shares are trading at $7.88, giving initial investors a 546% return.
Sezzle is focused on the United States market and reported a record June quarter. Underlying merchant sales surged 58% quarter-on-quarter to $272.3 million. This represents an increase of 349% year-on-year. Active customers rose 243% over the year to reach 1.48 million. Merchant numbers were up 219% to over 16,000.
In a July market release, Sezzle CEO Charlie Youakim said, “Our performance reaffirms our product’s utility to consumers looking for a smarter way to budget their personal finances and the overall market shift to eCommerce”.
Openpay joined the ASX in December last year, issuing shares at $1.60 each. The float valued the company at $150 million. Now Openpay has a market capitalisation of $425 million and shares are trading at $3.94. This gives IPO shareholders a hefty 146% return.
Openpay reported record growth in the final quarter of FY20 across leading indicators. Active plans increased 229% to 824,000 with notable improvements seen in the healthcare, retail, and automotive verticals. Active customers grew 141% to 319,000. In a July announcement, Openpay CEO Michael Eidel commented, “As more consumers sought better ways to structure purchases across their life needs, we saw a strong surge in new customers and plans”.
Total transaction value grew to $192.8 million for the full year, up 92% compared to FY19. Revenue grew by 64% to $18 million over the full year, with business more than doubling in the United Kingdom. UK growth was driven by ‘OpenMay’ promotions and the launch of major retailer JD Sports on the platform. Despite lockdowns, active merchants still increased 52% on the prior corresponding period in 4Q FY20, reaching 2,162. Openpay is typically the sole BNPL provider, or one of only two, in the healthcare and automotive verticals.
The ASX’s BNPL shares have all performed well since their debut, which will please early investors. The shift to purchasing now but paying down the track seems to be gathering pace as the economy struggles. BNPL providers are also leveraged to the broader shift to eCommerce. With BNPL still only accounting for 8% of online purchases, it seems the sector still has room to grow, both domestically and internationally.
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Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. 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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