BNPL Openpay goes under as creditors chase debts
Buy now, pay later company Openpay has entered receivership and shut its platform after it was voluntarily suspended from the Australian Securities Exchange on Friday, the latest casualty in the troubled BNPL sector.
Restructuring company McGrathNicol has been appointed receivers as creditors chase down the payments technology company following a quarter in which its net operating cash flow landed $18.2 million in the red.
Openpay is a platform through which customers can pay for purchases from the company’s partnered merchants in instalments, paying a fee to do so. Worth about $45.4 million in market capitalisation, the BNPL is a smaller player compared with its counterparts Zip Co, worth $512.8 million and Afterpay, worth $14.8 billion.
Following the ASX announcement, customers will no longer be able to use the Openpay platform for new purchases, but will still need to pay any outstanding balances in accordance with their existing agreements.
Securities in Openpay were trading at 20 cents a share when it was placed in trading halt last Wednesday and will remain suspended while the company’s strategy is assessed. The Melbourne-based company’s non-executive director, Yaniv Meydan, resigned on Friday.
The collapse comes less than a week after Openpay released a triumphant quarterly update. On January 31, it announced record results, including revenue up 59 per cent to $10.1 million.
However, Openpay’s cash balance signalled grave underlying issues with the business. Net cash from operating activities was negative $18.2 million in the December quarter, and $38 million in the red over the last two quarters. That left the company with cash and cash equivalents of $17 million at the end of the period, and $41 million in unused financing.
Arrears (1.7 per cent) and net bad debts (2.2 per cent) both increased compared with the previous corresponding period.
In the quarterly update, Openpay chief executive Dion Appel said the company’s credit performance remained within its target threshold and historical range.
“While credit performance has softened, it has done so when compared to the pandemic era, where government stimulus was high and Openpay prudently did not relax its underwriting rules,” he said.
An announcement to the ASX on Monday stated that McGrathNicol partners Barry Kogan, Jonathan Henry and Rob Smith, appointed by OP Fiduciary and Amal Security Services, now controlled the company’s assets, operations and trading activities.
“The receivers and managers will work closely with Openpay’s employees, merchants and customers to urgently determine the appropriate strategy for the business,” the statement read.
Openpay, which first listed in 2019, is not the only BNPL to feel the crunch amid rising interest rates.
Its suspension comes after New Zealand BNPL Laybuy announced last week that it would delist from the ASX.
Several BNPL players recorded phenomenal share price growth between 2020 and early 2021, spearheaded by Australian success story Afterpay, which was acquired by US company Square in August 2021.
But over the past year, a number of them have unravelled, including Zip Co, which has suffered a share price plunge, shedding 78 per cent from $3 a share in February 2022, to trade at 67 cents as of Monday.
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Source: Thanks smh.com