Will Openpay's collapse affect other BNPL share prices?

The recent collapse of fintech platform Openpay could presage the downfall of other buy-now-pay-later (BNPL) companies listed on the Australian Securities Exchange (ASX). Weaker BNPL platforms could struggle to survive in a hawkish interest rate environment that is undermining consumption and could eventually lead to recession. 

The benefits that BNPL technology brings to consumers nonetheless leaves room for stronger players to survive and potentially even flourish in the wake of adverse economic conditions. 

Openpay enters receivership after financing woes

Openpay has entered receivership after failing to obtain working capital from a key financing partner, essentially bringing an end to its business operations. 

Receivers from McGrathNicol were appointed on 3 February to offload parts of Openpay on behalf of secured creditors. 

'We're working closely with the management team on a business-as-usual basis for an orderly collection of debts,' said McGrathNicol partner Barry Kogan to the Financial Review. 

'There'll be a sale process launched soon for interest in the purchase or recapitalisation of any of the assets.'

The appointment of receivers arrived just after Openpay entered a trading halt on 1 February. 

The company's quarterly results released on 31 January highlighted delays in obtaining funding from AH Meydan Pty Ltd under its working capital facility, putting pressure on cash flows. 

Openpay had previously obtained extensions for a $10 million working capital facility with AH Meydan and a $30 million corporate debt facility from OP Fiduciary Pty Ltd. 

Difficulties tapping these finance facilities left Openpay in a challenging position however, particularly given the $18 million cash burn reported by the company last quarter. 

The embattled BNPL company's share price closed down 7% when it last traded on 31 January and had posted a 58% decline over the preceding 12 months.

Are other BNPL companies in peril?

The collapse of Openpay inevitably raises the question of whether other major players in Australia's fast-growing BNPL sector are susceptible to a similar fate. 

Other leading BNPL platforms have posted even sharper declines in their share prices than Openpay since the start of 2022. 

These include Zip, whose share price is down 78% over the past 12 months; Sezzle, whose share price is down 72%, and MoneyMe, whose share price is down 85%. 

All these companies could find themselves further weakened if ongoing rate hikes by the Reserve Bank of Australia undermine the willingness of Australian consumers to make purchases on credit. 

Block and Splitit best weather the storm

While the short-term monetary policy environment and related economic impacts are creating a bumpy road for BNPL players, the convenience and popularity of this new form of fintech mean that resilient companies may still have a promising future ahead of them. 

Figures from the Australian Finance Industry Association (AFIA) indicate that there are around 6.3 million BNPL customers in Australia, who have helped the sector expand to over $18 million in output. 

'Buy now, pay later is ultimately going to be a model that is very successful,' said Splitit CEO Nandan Sheth to The Australian in the wake of Openpay's receivership. 

Sheth may have ample cause to be optimistic, as Splitit is one of the ASX-listed BNPL companies whose share price has best weathered the recent challenges of the sector. 

Splitit's share price is down just 2.5% over the past 12 months - a minimal drop compared to other players whose declines have ranged between 58% to 85%. 

Another ASX-listed BNPL company to also better weather recent market travails is Block Inc. Block's share price is down a comparatively modest 16% over the past 12 months. The company's diverse range of operations and the backing of some of the world's leading tech executives, including former Twitter CEO Jack Dorsey, could put it in a strong position to endure in future.

Take your position on over 13,000 local and international shares via CFDs or share trading – all at your fingertips on our award-winning platform.* Learn more about share CFDs or shares trading with us, or open an account to get started today.

* Winner of ‘Best Multi-Platform Provider’ at ADVFN International Finance Awards 2022