Shares in buy now, pay later operator Sezzle rebounded 30 per cent on Tuesday after the company told investors it was still hopeful of obtaining a California Finance Lender licence after its application was blocked last month.
Sezzle shares slumped after the California Department of Business Oversight released a statement on December 30 rejecting the Minnesota-based, ASX-listed company’s application for the lending licence and accused the company of conducting illegal lending in the state.
Like market darling Afterpay, Sezzle lets shoppers pay for their purchases in instalments. Shoppers who use Sezzle select the payment type at checkout and Sezzle then takes over the sales contract from the retailer. Shoppers then repay in four instalments, the first of which is made at the time of purchase.
It’s unclear whether the business will continue to be able to operate in California without a license. Upon reviewing its application, the DBO found the business had already engaged in “illegal unlicensed lending” in the state and denied its application.
Sezzle shares ended the year at $2.09 apiece but then dived as low as $1.19 this week as news of the US state regulator’s assessment broke. The stock price surged more than 40 per cent on Tuesday afternoon to tap $1.93 in late trade after the company announced it was negotiating with the office.
Sezzle told the market that phone conversations with the regulator at the start of this week left it confident it has a “path to resolution”. It did not provide further details.
Afterpay told investors at the end of last week it had also applied for the same lender licence in California at the end of last year and had been approved.
California regulators said Sizzle was engaged in lending activity because it was “extensively involved” with its retail merchants in the processing of transactions through the platform and under California credit law, this suggested Sezzle was engaging in lending activity.
Source: Thanks smh.com