Beforepay (ASX:B4P) share price recovers 11% after disastrous IPO

Tuesday seems to be a brighter day for Beforepay.

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Key points

  • The Beforepay share price is rebounding after tumbling 44% on its IPO yesterday
  • Beforepay is a fintech pay-on-demand company offering users salary advances
  • Right now, its stock is still trading at $2.11 – 38% lower than its prospectus’ offer price

The Beforepay Group Ltd (ASX: B4P) share price seems to be getting back on the horse after crashing 44% on its float.

The pay-on-demand company debuted on the ASX at 11 am yesterday after offering its shares for $3.41 under its prospectus. Unfortunately, after finalising its initial public offering (IPO), its stock tumbled to close yesterday’s session at $1.905.

However, Tuesday seems to be a brighter day. At the time of writing, the Beforepay share price is $2.11, 11.02% higher than its previous close.

Let’s take a look at the ASX newbie’s rollercoaster start to its time on the market.

But first, what is Beforepay?

Beforepay is a financial tech company providing those who use it with advances on their salary.

According to Beforepay chair and former Westpac Banking Corp (ASX: WBC) managing director and CEO, Brian Hartzer, the company is filling a gap for on-demand access to credit.

Hartzer says that the company’s technology provides a “suite of budgeting tools”, delivered through formats including smartphone and online applications, custom budgeting tools, and a “pay-cycle detection algorithm”.

Additionally, between its launch in August 2020 and October 2021, Beforepay had a 25.3% compound monthly growth in active users and advanced $170.5 million of pay.

On its debut, the company released an operating update on its December quarter wherein it provided $77 million of pay advances – up 361% on the prior comparable period.

On top of that, its default rates had more than halved, reaching 3% in the quarter.

What sent the Beforepay share price tumbling after its IPO?

It’s hard to say what made the market turn its nose up at Beforepay’s stock’s float.

As part of its IPO, the company raised $35 million and was left with 46.4 million shares.

That saw it with an expected market capitalisation of $158 million. However, come yesterday’s close, the Beforepay share price saw the company with a valuation of around $88 million.

The proceeds of the offer will help the company acquire more customers, grow its Cash Outs, refine its products and models, explore overseas opportunities, and pay for the costs of the offer.

Should you invest $1,000 in Beforepay right now?

Before you consider Beforepay, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Beforepay wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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