The buy now, pay later space is suffering from a confluence of ills. Competition is fierce. Profitability is elusive. Consumers are overextended. And cheap capital is getting harder to find. So it makes sense that BNPL will continue to consolidate.
And earlier this week we got news of yet another deal that underscores this point. Zip, the Australian company that has been scooping up smaller BNPL players around the world, acquired Minneapolis-based Sezzle. The “all-scrip transaction” (essentially the same thing as an all-stock deal) totaled 491 million Ozzie dollars. That translates to about US$371 million.
“We are delighted to be bringing Zip and Sezzle together under a transformational transaction that is expected to deliver immediate scale and enhanced growth, which will support our path to profitability. Combining with Sezzle positions us as a leading global BNPL provider and prioritizes our ability to win in the important U.S. market,” said Larry Diamond, Co-Founder and Global CEO of Zip.
As noted, Zip has been on a global acquisition tear for some time now. Here are some of its more significant acquisitions.
In 2020, Zip acquired U.S. BNPL Quadpay for US$269 million. Last summer, after operating Quadpay under its own brand for a year, Zip consolidated Quadpay under the Zip brand.
Last September, Zip acquired the remaining shares of South African BNPL Payflex for an undisclosed amount after purchasing 25% of the business in April 2021.
And in May 2021, Zip purchased Dubai-based BNPL Spotii for about US$16 million. Spotti had launched its product just a year earlier. Notably, the Middle East is a highly competitive BNPL market. Also last year, BNPL player Afterpay (now owned by Square parent company Block) made a U.S.$10 million investment in Spotii rival Postpay.
Also in May 2021, Zip acquired Czech Republic-based BNPL Twisto. The company paid AU$140 million (about US$103 million) for Twisto, though it already owned an unspecified stake in Twisto at the time. So the deal’s true value is unclear.
Sezzle, a Brief History
Sezzle was founded in 2016 by Charlie Youakim, Emmanuel Isaac, Killian Brackey, Mia Peroff, Paul Paradis, and Rishi Mukherjee.
The company went public in 2019 on the Australian stock exchange. This may seem odd, given Sezzle was founded in Minnesota. Here’s how CEO and Co-founder Youakim explained that decision at the time.
“Our decision to list on the ASX is a reflection of the Australian investors’ familiarity with ‘buy now, pay later’ payment solutions. The Australian market is several years ahead of North America in terms of providing a more flexible way for consumers to pay overtime,” Youakim said.
“We have seen firsthand the demand for our payment platform in the U.S. and Canada and are excited to continue to lead the industry in offering the most consumer-friendly solution that financially empowers young people.”
Tough Times for BNPL
Sezzle, like other BNPL stocks (and tech stocks generally), has taken a beating this year. Since December 31, 2021, the company’s stock has lost about half its value, from 3.0 (AUD) to 1.5 yesterday.
Of course, Sezzle isn’t alone. Affirm, for example, is trading at about a third of its end of year value, falling from 100.56 (USD) to 36.25 yesterday.
And Zip itself has taken a beating. Its shares are currently trading at around AUD1.72. This compares to 4.33 at the end of 2021.
BNPL seems to be experiencing a double whammy. First from skepticism about the BNPL space specifically, driven by growing consumer defaults among other factors. And second, from the broader retreat from tech stocks, fueled in part by fears that the era of cheap capital to fuel growth may be coming to an end.
