Openpay IPO: a possible contender to Afterpay’s BNPL throne?

Has the buy now pay later (BNPL) market peaked?

With the arrival of Openpay to the ASX boards, it’s a worthy question to ask.

Indeed, Openpay now joins a raft of fast-growing, Australian-listed BNPL companies, included among them: Zip (ASX: Z1P), Afterpay (ASX: APT), Sezzle (ASX: SZL) and Splitit (ASX: SPT).

With this in mind, below we take a look at some of the key details behind today’s Openpay (ASX: OPY) IPO:

The Afterpay-benchmark

Openpay – listing under the stock ticker OPY – shares many of the key characteristics of the other ASX-listed BNPL companies we just listed.

Namely, it’s growing fast, and it has global ambitions.

When compared to the likes of Afterpay however, Openpay is targeting a slighlty different market, with the company noting that its BNPL plans range ‘from between 2 and 24 months in duration, and of values between $50 and $20,000.’

By comparison, Afterpay (ASX: APT) is much more focused on lower-value, shorter-term ‘BNPL plans.’

Commenting on the company’s competitive advantage, Openpay noted in its Prospectus that it 'has been able to establish a competitive market position and has been able to attract a comparably older Customer base (often with high average transaction values), which Openpay considers to be more financial savvy and lower risk.'

By comparison, Afterpay targets a distinctly younger, mostly millennial audience.

Finally and looking at some of Openpay's key growth metrics, we see that active merchants, active customers and total transaction values have all trended up over the last three fiscal years.

Openpay has grown its active merchants from just 383 in FY17 – to a significant 1,510 in FY19.

In-step with this, active customers have risen from around 39,000 all the way up to 133,000 in FY19. Active Openpay Plans reached 251,780 in FY19.

Finally, total transaction value reached $87.3m in the 2019 fiscal year – up from $27.7m in FY19.

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Openpay share price: details of the IPO

As part of today’s successful IPO, Openpay (ASX: OPY) has successfuly raised $50 million in fresh funds, making 31.25 million shares available to retail and institutional investors in the process – at an offer price of $1.60 each.

'The Shares being offered will represent 33.3% of the total number of Shares on issue on Completition of the Offer.’

Meydan Group and Investec are the most significant holders of OYM stock: holding 24.3% and 10.5% of shares – post-offer.

Disappointingly for IPO investors, OPY’s share price fell soon after becoming tradable today – trading at the $1.350 mark as of 13:37 AEDT.

Openpay will use a significant portion the funds raised from today’s $50m IPO to further its UK expansion plans, a BNPL market which the company posits is both less developed and significantly larger than Australia’s BNPL market.

To capitalise on this opportunity, of the $50m raised under the offer: $8.0m will go towards UK staffing investments, $2.3m to UK marketing and customer acquisitions and a further $10.0m to funding UK receivables growth.

Ultimately, it will be up to the markets to decide whether Openpay can become a legitimate contender to the likes of Afterpay, Zip and others.

Watch this space.