June was a terrible month for ASX BNPL shares. Here’s why

Last month brought more suffering for ASX BNPL stocks.

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Key points

  • ASX BNPL shares have had a terrible time in 2022, with many of the market's biggest names falling around 50% in June alone 
  • Their suffering came amid another interest rate hike, designed to tackle rising inflation 
  • While most ASX BNPL shares stayed quiet last month, there was plenty happening in Humm's camp 

ASX buy now, pay later (BNPL) shares suffered through June, falling as much as 58% in just 30 days.

Interestingly, most ASX-listed companies in the field were silent during this time. Here’s how the ASX’s most renowned BNPL shares performed last month:

For context, the S&P/ASX 200 Index (ASX: XJO) slipped nearly 9% last month while the All Ordinaries Index (ASX: XAO) slumped 9.5%.

So, what inspired such a dismal period for ASX BNPL shares? Let’s take a look.

What dragged ASX BNPL shares down in June?

Inflation, rates, and potential regulation, oh my. ASX BNPL shares suffered through yet another month of uncertainty in June.

The Reserve Bank of Australia hiked interest rates by 0.5% early last month in an attempt to control surging inflation. And that was likely bad news for ASX BNPL shares.

Increasing rates make debt more expensive and, as a result, generally slows the economy, my Fool colleague Brendon Lau reports.

Pricier debt is often a hit to companies’ bottom lines. But BNPL companies face even greater challenges in such an environment.

A slower economy increases the likelihood that BNPL users default on payments, creating more bad debts.

Additionally, consumer sentiment tends to waver when rates rise. That could see fewer customers forking out on purchases they would otherwise use BNPL services to cover.

And finally, the regulation of BNPL companies has been flagged once more. Federal Financial Services Minister Stephen Jones is reportedly expected to introduce legislation to do just that in the near future.

There was also some notable drama among ASX BNPL shares last month.

Drama in Humm’s camp

While most ASX BNPL shares stayed silent through June, the Humm board was reshaped into a battleground.

Five of the company’s six board members announced their resignation last week after its remaining director campaigned against the now-scrapped sale of its BNPL leg.

Humm founding director and major shareholder Andrew Abercrombie fought against the company’s plan to sell its consumer finance business to Latitude Group Holdings Ltd (ASX: LFS) in a previously proposed mostly-scrip deal.

The company previously noted the business had failed to turn a profit in 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 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 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 Scott Phillips.

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