Why is the Block share price tumbling another 5%

It’s another bad day for the buy now pay later company.

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Key points

  • The Block share price is tumbling nearly 5% today 
  • This BNPL company's US listing also plunged nearly 4% overnight 
  • The Federal Reserve is tipped to raise the benchmark interest rate on Wednesday in the United States 

The Block Inc (ASX: SQ2) share price is tumbling again after a horror day yesterday.

The company’s share price is currently trading at $88.48, a 5% fall from Tuesday’s close. For perspective, the S&P/ASX 200 Index (ASX: XJO) is down 0.45% at the time of writing.

So what could be impacting the Block share price?

Why is the Block share price falling?

Block shares are descending today after tumbling more than 15% on Tuesday.

The Block share price seems to be following in the footsteps of the company’s US listing. Block Inc (NYSE: SQ) shares dropped 3.92% on the New York Stock Exchange on Tuesday.

It seems investors are selling off buy now pay later (BNPL) shares ahead of a US Federal Reserve meeting on Wednesday. Analysts are tipping the US benchmark interest rate could rise by up to 0.75%. Interest rate rises can increase the borrowing costs for BNPL shares.

In early June, the Wall Street Journal highlighted the impact of rising interest rates on BNPL shares including Block. The publication expressed concern that “late payments or related losses” are piling up for Zip, Affirm Holdings, and Block. The WSJ added:

Buy-now-pay-later companies sometimes rely on credit lines whose rates rise and fall along with the Federal Reserve’s benchmark rate, which has risen 0.75 percentage point so far this year and is poised to go up even more. 

Block is not the only BNPL company in the red today. The Sezzle Inc (ASX: SZL) share price is plummeting 13.51% while Zip Co Ltd (ASX: ZIP) shares are down 3.4% In contrast, Openpay Group Ltd (ASX: OPY) shares are up 9.38% at the time of writing.

Block listed on the ASX in February after taking over Afterpay.

Share price snapshot

The Block share price has nose-dived nearly 50% year to date while it has fallen nearly 23% in the past month alone.

For perspective, the benchmark ASX 200 Index has descended more than 10% in the year to date.

Block has a market capitalisation of about $3.7 billion based on the current share price.

Motley Fool contributor Monica O'Shea has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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