Zip, Afterpay and Sezzle shares crash: here’s what drove the sell-off

BNPL in free-fall

Australian capital markets have attracted a flock of variable quality buy now pay later companies over the last few years. The list of such companies, non-exhaustively includes Afterpay, Zip, Sezzle, Splitit and Openpay.

Like US-based BNPL company Affirm, Australia’s cohort of BNPL leaders and rising stars fell hard on Wednesday, as the market recalibrates for elevated levels of competition. By 12:45 PM, Afterpay was down 8.69% to $108.07, Sezzle had dropped 9.7% to $8.01 per share and Zip had cratered over 10%, trading at $7.43 per share.

We look at the top 10 Australian BNPL stocks here.

Other ASX-listed BNPL companies such as Splitit and Openpay also saw their share prices decline off the back of these developments.

As we previously wrote, this all comes as reports emerge that Apple is looking to launch its own BNPL product, tentatively titled Apple Pay Later.

That product, as reported by Bloomberg, would allow customers to pay for purchases in installments via Apple Pay, both in-store and online. Two versions of the product are speculated to be in development: one short-term focused product, titled Apple Pay in 4, and a product which focuses on longer-term repayment arrangements, titled Apple Pay Monthly Installments.

Goldman Sachs is set to act as the lender for this product offering, though it should be noted that information on such a product has not been officially confirmed by either Apple or Goldman Sachs.

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Other competitive pressure

It wasn’t just reports of Apple’s potential entrance into the market that likely spooked investors on Wednesday, with Macquarie on Wednesday reporting that PayPal was set to switch on its BNPL installment offering in Australia on June 15.

Here the investment bank made the point that PayPal’s installment offering would launch without late fees, arguing that such a move will likely be viewed positively by both merchants and customers.

‘We think Paypal’s move to offer no late fees is a strong move to encourage adoption of their pay-in-4 vs,’ Macquarie analysts said.

Macquarie's DFC valuation of Afterpay lowers from $140 per share to $130 per share when you remove late fees from the valuation equation. A price, it should be noted, which still stands firmly above where Afterpay last traded.

Looking at the competitive dynamics of the BNPL space moving forward, analysts from Macquarie said ‘we expect a period of consolidation within the industry before seeing a better outlook for the industry overall.’

New entrants in Australia's BNPL space include PayPal, Citi and StepPay.