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Why the IOUpay (ASX:IOU) share price crashed 13% lower today

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It was another very disappointing day of trade for the IOUpay Ltd (ASX: IOU) share price on Monday.

The Malaysia-based buy now pay later (BNPL) provider’s shares ended the day 13% lower at 53.5 cents.

This means the IOUpay share price has now fallen 37% since peaking at a record high of 85 cents last Monday.

Why is the IOUpay share price under pressure?

Investors have been selling IOUpay’s shares since its surprise and opportunistic $50 million placement last week.

The placement saw sophisticated and institutional investors offered 100 million shares at 50 cents per share. This represented a 28.6% discount to its last close price at the time of 70 cents.

According to the release, the proceeds will be used for growth initiatives including digital payments and to accelerate new business development opportunities in the BNPL sector in South East Asia.

IOUpay’s Chairman, Aaron Lee, explained: “The Company is delighted to see the market respond so strongly to our plans to accelerate our market position as a leading operator in the digital payments and BNPL sectors in South East Asia.”

“This capital raising represents another important milestone in our roadmap to expand our existing and new product offerings and accelerate the growth potential of that expansion. We welcome all new shareholders and thank our existing shareholders for their continued support for this exciting new next chapter of IOU which combined with existing cash reserves provides us with a strong capital platform to execute our market validated business plan,” he concluded.

Is IOUpay the real deal?

At this stage it is too early to know whether IOUpay is the real deal. The company has only just launched its offering and has yet to report back on how that is progressing.

In addition to this, the company could soon have competition from Afterpay Ltd (ASX: APT). Last year it acquired Singapore-based but Indonesia-focused BNPL company EmpatKali.

If Afterpay decides to expand properly into the region, it seems only logical that Malaysia will be on its list eventually.

IOUpay shareholders will no doubt be hoping the company can gain a foothold before that happens.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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