Australian BNPL company Zip exits Singapore, deprioritizes crypto offerings
Zip Co Ltd and QuadPay are shown on a smartphone screen June 10, 2020. Australian buy-now-pay-later company Zip said on Thursday it is weighing a write-down on its new US and European businesses, exiting Singapore and “deprioritizing” a cryptocurrency offerings, citing challenging market conditions.
Esra Hacioglu | Anadolu Agency | Getty Images
Australian buy-now-pay-later company Zip said it weighed an impairment charge on its newly acquired US and European businesses and is “downgrading” a cryptocurrency offering, a blow to the sector’s once-formidable growth prospects.
The company, which saw its shares soar during a Covid-19 trading frenzy, only to fall this year, also said it was exiting Singapore and halting corporate lending due to “significant and rapid changes in the broader macro and capital environment.”
The update reflects a worsening outlook for BNPL operators that have seen valuations collapse as inflation pushes up interest rates and squeezes consumption. This month, a capital raising by Sweden’s Klarna valued it at $6.7 billion, up from $46 billion in 2021.
For Zip, Australia’s second-largest BNPL behind Block Inc’s SQ.N Afterpay, the pandemic spurred several acquisitions, including New York-based Quadpay, valuing the company at $269 million.
Zip then acquired Dubai-based Spotii and the Czech Republic’s Twisto for a total of A$160 million ($110 million). It planned to buy rival Sezzle before pulling out this month.
“Reflecting current market conditions, the company has reviewed the goodwill against the Spotii, Twisto and Quadpay assets and is assessing the need to take an impairment charge,” the company said.
Zip did not state the size of the potential cost, but CEO Larry Diamond said canceling the Sezzle purchase would cause Zip, which has yet to turn a profit, to “reach cash EBTDA profitability earlier than expected.”
Like many financial firms, Zip planned to capitalize on the exploding popularity of cryptocurrency trading with younger clients by promising a digital asset trading platform by mid-2022. That was now “downgraded,” it said.
In a limited trading update, the company said net bad debt in Australia, which is payments more than 180 days late, grew to 3.82% of receivables on June 30, from 3.4% on March 31, a “peak in losses “.
Zip shares rose 4.5%, against a flat market, but are still down 85% since January.
“Credit risk remains elevated,” UBS analyst Tom Beadle said in a research note, calling Zip’s market filing “another trading update heavy on top-line details without meaningful profitability metrics we need to assess Zip’s progress”.
