The Laybuy Holdings Ltd (ASX: LBY) share price is tanking today, down 6.55% at the time of writing to $1.92 a share. LBY shares opened at $1.94 this morning and have essentially remained flat for the rest of the trading day after closing at $2.06 yesterday.
It’s been a topsy-turvy ride for Laybuy, the ASX’s newest buy now, pay later (BNPL) share to get investors’ blood pumping. Laybuy only IPOed on the ASX boards earlier this week. We are talking about an ASX baby here.
That being said, the company has been around since 2017 and has been growing quickly in Australia as well as New Zealand and the United Kingdom. It is not even close to being in fellow BNPL rivals’ Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) in terms of market capitalisation. Even so, today’s moves still value the company at around $360 million, which is nothing to sneeze at given the company has just joined the share market.
A recent IPO
And what an entrance it was. The IPO listing price for Laybuy shares was just $1.41, which the share price handily breezed past when the shares hit the market. Even though Laybuy shares finished at $2.08 on its first day of trading (41% above its IPO price), at one point the shares were asking $2.30, a good 63% above where it started.
Laybuy shares, however, have been in a downwards trend ever since, a trend that today’s trading has only added to.
Why has the Laybuy share price tanked today?
You have to pity this company’s IPO timing. BNPL shares have not had a good 2 weeks. Afterpay is down more than 20% since 25 August, whilst Zip shares are down 31.5% over a similar period. Investors have been bailing out of BNPL shares ever since it was announced that global payments giant PayPal Holdings Inc (NASDAQ: PYPL) will be joining the BNPL fray with its own product offering ‘Pay in 4’.
Add that to the global sell-off in tech shares we’ve seen over the last few days and we can see why the Laybuy share price has been cooling off over the week and today.
Laybuy or Laylow?
Laybuys’ prospects as an investment do look promising. The company has told investors that the gross merchandise value (GMV) of the payments going through its system was up 161% year on year for July and August 2020.
However, I’m increasingly worried about the BNPL sector today. We are now seeing a lot of different players all vying for the relatively small (albeit rapidly growing) BNPL pie. Not only do we have the market leaders in Afterpay and Zip, but we also have Sezzle Inc (ASX: SZL), Splitit Ltd (ASX: SPT), Openpay Group Ltd (ASX: OPY) and the soon to be renamed FlexiGroup Ltd (ASX: FXL). And that’s just on the ASX alone. There’s also Paypal, American Express Company (NYSE: AXP), Mastercard Inc. (NYSE: MA) and Visa Inc (NYSE: V) to think about.
As such, I’m staying away from the sector, and especially from smaller players like Laybuy that still (in my view) have a lot to prove. This is a growing space to be sure, but I don’t think the rising tide will lift all boats.