Why did some ASX BNPL shares plummet more than 90% in FY22?

Last financial year saw the market turn on some BNPL favourites.

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Key points

  • ASX BNPL shares suffered a major turn in FY22 
  • Many of the market's former favourites tumbled between 49% and 97% over the course of last financial year 
  • Most of those falls can seemingly be chalked up to shifting investor sentiment 

ASX buy now, pay later (BNPL) shares were hit hard over the course of financial year 2022 (FY22), with some tumbling as much as 97%.

Here's how the market's favourite BNPL stocks performed last financial year:

  • Zip Co Ltd (ASX: ZIP) – fell 94% to 44 cents
  • Block Inc (ASX: SQ2) – fell 48.76% to $90.50
  • Humm Group Ltd (ASX: HUM) – fell 58.5% to 41 cents
  • Sezzle Inc (ASX: SZL) – fell 97% to 26 cents
  • Splitit Ltd (ASX: SPT) – fell 75% to 13 cents

For context, the S&P/ASX 200 Index (ASX: XJO) slipped around 10% in that period.

So, what exactly sent ASX BNPL shares tumbling in FY22? Let's take a look.

What went wrong for ASX BNPL shares in FY22?

Afterpay waves goodbye

Former ASX market darling and BNPL giant Afterpay was wiped from the books in FY22 after it was snapped up by Block. The deal – once worth $39 billion – saw Afterpay shareholders offered 0.375 Block shares for each stock owned.

Afterpay left the ASX in early February after Block's CHESS Depository Interests (CDIs) hit the market in January.

What else went on with BNPL shares?

There was plenty more major news impacting ASX BNPL players in FY22.

Zip posed a takeover offer for fellow BNPL stock, Sezzle in February. Under the deal, shareholders would receive 0.98 Zip stocks for each Sezzle share owned.

And, of course, an abundance of new competition broke out onto the scene.

Commonwealth Bank of Australia (ASX: CBA) launched its StepPay offering early in the peace. National Australia Bank Ltd (ASX: NAB) revealed a similar product in May.

But it wasn't just ASX 200 banking giants encroaching on the space. Word that tech giant Apple may soon launch its Apple Pay Later offering hit headlines in June while PayPal scrapped late fees from its BNPL service last year.

ASX turns on BNPL shares

Though, the major driver for ASX BNPL shares' downturn appears to be a huge shift in investor sentiment.

FY22 saw Australia's inflation spike to 5.1%, after which the Reserve Bank of Australia implemented a series of rate hikes.

That went hand in hand with a turnaround in the tech sector. Many tech stocks derive their valuations from assumed future profitability. Thus, they can represent greater risks in inflationary environments.

At least ASX BNPL shares weren't alone in the red. The S&P/ASX 200 Information Technology Index (ASX: XIJ) and the S&P/ASX All Technology Index (ASX: XTX) have fallen more than 30% over the last 12 months.

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 Apple, Block, Inc., PayPal Holdings, and ZIPCOLTD FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool Australia has recommended Apple, Humm Group Limited, and PayPal Holdings. 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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