The Sezzle Inc (ASX: SZL) share price has jumped 80% on its IPO debut at the time of writing.
Sezzle is a US based and incorporated business, which provides an interest-free instalment payment solution. It has been operating since 2017 and is now in 12 countries. It listed on the ASX with an initial public offering price of $1.22 per share/CDI. Sezzle does not charge interest or initiation fees, however it does charge failed payment fees of US$10.
Sezzle’s Rocketing Start
With a listing price of $1.22, the company has seen its share price climb to $2.17 which means it has grown 78% on the first day the time of writing.
Sezzle has been growing strongly in recent times. At 31 March 2019, the company had 3,321 active merchants, mostly in the US, with 269,820 ‘active’ customers. In 2018, Sezzle’s total income grew by an average quarterly growth rate of 101%.
Sezzle will be focusing its efforts and money on growing in the small and medium business segment, expanding the team for enterprise merchant accounts, growing in Canada, growing its in-store capabilities and improving its ‘fraud and decisioning models’.
Obviously a key part of the company’s growth will be how many transactions it can actually fund. This IPO money will help somewhat, and being listed will give it more leverage to talk to lenders like banks.
The company’s shares have got off to a great start, but there are plenty of risks. It is much smaller than its peers like Afterpay Touch Group Ltd (ASX: APT), doesn’t have much trading history and one of the stated risks in the prospectus is the “the ability to turn the net transaction margin into a positive percentage.”
Sezzle said that merchant fees as a percentage of merchant underlying sales were 4.8% and 3% in FY18 and FY17 respectively.
I’ll be following with interest, but it’s not the type of business I’d invest in for my portfolio. Instead, I’d want to invest in the rapidly growing businesses in the free report below instead.
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