On-demand lender Beforepay sees massive price drop on ASX debut
That slashed nearly $70 million from the company’s valuation, with consumer advocates warning that younger generations are likely to take on debt.
Beforepay, a fintech that gives people an advance on their wages before payday, suffered a horrific entry on the Australian Stock Exchange after its shares plunged 44% from its initial price offer.
The company’s share price fell from $3.10 to $1.90, breaking last year’s record for the worst first-day performance on the ASX.
The crash entry saw Beforepay’s market valuation drop from $158 million to $90 million.
The fintech, which has around 139,000 users, tripled its customer base in just 12 months and on average customers borrow $260 and take 15 days to repay.
He’s handed out $77 million in the past four months alone.
Services like Beforepay are particularly popular among the younger generation, with Finder research showing nearly a quarter of Gen Z Australians have used an on-demand payment service to access their income sooner.
Meanwhile, Beforepay’s default rate sits just above 3% after it stopped lending to Centrelink customers in a bid to improve the figure, after 7% failed to make payments on time .
Last year the company, which is chaired by former Westpac chief executive Brian Hartzer, raised $35 million from investors in its IPO.
Managing Director Jamie Twiss defended Beforepay’s performance on the ASX, saying “markets go up and down” and prices pulled back in November under very different trading conditions.
He added that the Australian company plans to expand into larger international markets.
“The United States is probably the market we are considering the most seriously. It’s an emerging category in the United States,” he said. The Australian.
“We’d like to see rapid growth, but we don’t want to be reckless with our investors’ funds or the money we lend to clients.”
He added that improved technology and data meant they had increased limits for “some of their most creditworthy customers” in Australia.
“We’re attracting increasingly creditworthy and affluent clients who can handle a $200 payday advance the first time rather than $100,” he said.
But consumer advocates have called for better financial regulation for services such as Beforepay to protect vulnerable customers.
“Payday advance products are becoming more prevalent and causing harm to some people,” Financial Counseling Australia said in a December report.
“Although separate from BNPL, they use the same loophole in the law to offer products without safe lending practices.”
However, Mr. Twiss defended the company’s lending practices, saying there was no debt rollover, late fees or interest rates.
Instead, customers are required to repay the original loan, plus a fixed 5% lump sum on top of that which does not increase, with a maximum accessible amount of $1,000.
Investors dumping Avantpay shares reflect difficulties in other parts of the subsequent payment industry, including Afterpay and Zip Co.
Last year, buy-it-now, pay-later providers revealed millions in losses and also took a beating in the stock market with shares plunging an average of 80%.
Afterpay posted a loss of $156.3 million for the last fiscal year, up almost 700% from last year. BNPL’s rival service Zip also reported a loss of $652 million, a whopping 3,000% increase from last year, when it reported a $20 million deficit.