Buy now pay later startup Openpay has seen its share price plummet on its first day on the ASX, down 15 per cent before the end of its first half hour on the boards.
The fintech, which provides payment plans for customers investing in large retail purchases, dropped from an issue price of $1.60 to $1.35 at 12:30pm, after listing at noon on Monday.
In contrast to its key competitor Afterpay, Openpay is focused on shoppers in their late 30s and offers interest free “payment plans” to shoppers for purchases of between $50 and $20,000.
It targets large purchases made by this cohort, including home improvements, auto payments, vet care and dentistry.
Ahead of listing, chief executive Michael Eidel said he envisaged a world where instalment payments were not an addition to traditional credit products, but the standard payment offer.
“For me, buy now pay later will become the new normal – what credit cards have been for 50 to 80 years,” he said.
Mr Eidel took the helm of the business, which was co-founded by Yaniv Meydan and Richard Broome, in March of this year.
Openpay was not deterred by the collapsed float of payments company Latitude and completed its $50 million initial public offer at $1.60 to list at noon on Monday with a $150 million market cap.
“Our focus is on what we call the savvy, grown up consumer,” Mr Eidel said last week.
Openpay argues that by chasing 30-somethings with dentist bills to pay, it is collecting a lower-risk cohort of borrowers than its buy now pay later counterparts focused on a younger market.
Unlike Afterpay and Zip, the company has a close to 50-50 split between customers and merchants for its revenue generation.
Retailers are charged 1.75 per cent of the transactions for lower value items, but can pay a commission of as much as seven per cent on dentistry or renovations.
Customers don’t pay interest but they may have to pay a processing fee of around $2.50 if they borrow large amounts, plus late fees.
However, Openpay is dwarfed by Afterpay’s reach: while the market darling announced it had hit $1 billion in sales last month, Openpay processed just under $100 million in sales in 2019, up from $27 million in 2017.
The company’s costs have also ballooned over the past 12 months. It increased revenue to $11 million last year but is operating at a $14 million loss.
Co-founder Yaniv Meydan holds the largest stake in the company, owning close to 25 per cent of the business through the Meydan Group.
Investec holds 10.5 per cent.
Source: Thanks smh.com