Sezzle share price leaps 10% on oversubscribed share purchase plan

The Sezzle Inc (ASX: SZL) share price leapt by nearly 10% this morning when the buy now, pay later (BNPL) provider announced the successful completion of its oversubscribed share purchase plan. The plan was taken up by 4,395 eligible shareholders representing a participation rate of 72.58% with an average application amount of $17,796. 

The Sezzle share price has since pulled back slightly and is sitting at $7.48 per share at the time of writing.

What does Sezzle do?

Sezzle is a BNPL provider focused on the North American market. It listed on the ASX in mid-2019 at an issue price of $1.22 and quickly became a favourite with BNPL investors. The company is less than 5 years old but has seen significant growth in the United States under the leadership of CEO, Charlie Youakim, who is also the company’s largest shareholder.

Sezzle’s interest free instalment plans are now available via over 16,000 merchants online and select in-store locations. Customer approval is instant and does not impact credit scores unless the customer opts in a credit-building feature, ‘Sezzle Up’. 

How has Sezzle been performing? 

Like competitor Afterpay Ltd (ASX: APT), Sezzle has seen some serious growth in customer numbers and transaction volumes since the start of the coronavirus pandemic. Active customers grew by 28% in the June quarter to reach 1,475,235. Underlying sales grew 57.5% to $188 million during the quarter, a 348.6% year-on-year increase. This performance sent the Sezzle share price flying in July.

The shift to online shopping prompted by the pandemic has positioned BNPL providers as key partners for merchants looking to decrease cart abandonment and increase sales. Sezzle increased active merchant numbers by 26.7% to 16,112 in the June quarter, a 219% increase year on year. Where customers opt to use Sezzle, the company pays the merchant in full upfront, collecting payments in instalments from the customer. The merchant pays Sezzle a processing fee, typically a percentage of the purchase price. Merchant fees increased 54.8% in the June quarter, reaching $10.6 million. This represents a 397% increase year on year. 

Why the share purchase plan? 

Sezzle launched an $86 million capital raising last month to provide funds to accelerate its growth strategy. The raising consisted of a $79 million placement and $7.2 million share purchase plan.

Today, Sezzle announced that due to the strong level of application under the share purchase plan, issuance had to be scaled back. This means that demand from Sezzle’s retail investors was strong, necessitating that shares available under the plan be distributed pro rata to shareholders who applied. 

Foolish takeaway

The strong demand for Sezzle shares under the share purchase plan is unsurprising – shares were offered at $5.30 under the plan with the Sezzle share price currently $7.48.

While the Sezzle share price has pulled back from this morning’s high, it is still trading 4.8% higher than yesterday’s close.