March was a lousy month for ASX BNPL shares. Here’s why

What happened to BNPL shares last month? We take a closer look…

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Key points

  • March was rough for many ASX BNPL stocks, with only one of the sector's biggest players recording a gain for the month
  •  Inflation and interest rate fears might have impacted the BNPL sphere last month
  • However, its constituents were also weighed down by the planned merger of Zip and Sezzle and several index shakeups

Last month was a rough one for most ASX buy now, pay later (BNPL) shares.

While the broader market ended the month in the green – the All Ordinaries Index (ASX: XAO) and S&P/ASX 200 Index(ASX: XJO) each gained 6.3% in March – nearly all ASX-listed BNPL stocks slipped lower.

In fact, the market’s favourite pureplay BNPL stock, Zip Co Ltd (ASX: Z1P), recorded the biggest tumble of the month.

So, what dragged on some of the sector’s biggest players in March? Let’s take a look.

What drove ASX BNPL shares lower in March?

While ASX BNPL shares might have been hit with talk of inflation and interest rate rises, there were plenty of concrete happenings that weighed many down last month.

Firstly, shares in Zip and Sezzle Inc (ASX: SZL) both entered March fresh from the freezer after the former made a takeover bid for the latter.

The all-scrip deal – quickly accepted by Sezzle’s board – will see investors receiving 0.98 shares in Zip for each Sezzle stock they own.

The Zip share price tumbled 6% on 1 March, while that of Sezzle gained almost 10%.

Zip also underwent a $148.7 million institutional placement to strengthen its balance sheet last month. Finally, it opened a share purchase plan that could raise $50 million.

Additionally, Sezzle made more headlines in March when it announced it would dump 20% of its workforce to save around US$10 million annually.

Over the course of last month, the Zip share price tumbled 32.5% while that of Sezzle fell 24.1%.

Block Inc (ASX: SQ2) was one of the only ASX BNPL shares to record a gain last month. It is, of course, the owner of former market favourite, Afterpay.

The Block share price gained 19.3% in March despite no news being released by the company. However, it was removed from the S&P/ASX 20 Index (ASX: XTL).

Speaking of index movements, shares in Latitude Group Holdings Ltd (ASX: LFS) entered the All Ords last month. Meanwhile, those of Splitit Ltd (ASX: SPT) were booted from the benchmark index.

Novatti Group Ltd (ASX: NOV)’s stock also went through an index shakeup – it was dumped from the S&P/ASX All Technology Index (ASX: XTX).

The share prices of Latitude, Novatti, and Splitit fell 5.7%, 4.1%, and 11.1% respectively last month.

Finally, ASX BNPL shares Humm Group Ltd (ASX: HUM) and IOUPay ltd (ASX: IOU) also slipped lower last month. They fell 2.2% and 5.5% respectively.

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. owns and has recommended Block, Inc. and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended Block, Inc. The Motley Fool Australia has recommended Humm Group Limited. 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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