While Afterpay signalled a stepped-up attack on the huge US retail credit market via a fund raising that saw its shares suspended until Monday, shares in rival buy now pay later group, Zip took a hammering after an unimpressive interim report.
Afterpay’s shares were suspended to allow the company to raise $1.25 billion in a convertible note issue (with another of $250 million in overs).
The company said that will help it pay $373 million to lift its ownership of the company’s rapidly growing US business.
The surprise news came as it also reported a doubling in underlying sales for the six months to December, but no profit, as some analysts had speculated.
Instead, it reported a loss after tax of $79.2 million.
The buy now, pay later business said in the results statement to the ASX that active customers numbers jumped 80% to 13.1 million in the six months to December, with the US customer numbers growing at 127% to 8 million, which helps explain the stepped up US move.
Global underlying sales on the company’s platform were up by 106% to $9.8 billion.
The US deal would see Matrix Partners X and other part owners of its American business sell down their equity interests in Afterpay US, so that Afterpay’s underlying interest in the business rose from 80% to 93%.
But when Afterpay shares are re-listed on Monday there may be a big stick awaiting from investors after not reporting a profit and instead a loss, if the reaction to the interim results from rival Zip are any guide.
That said, the positive message from the US deal should be enough to offset any disappointment.
Zip reported a $453.8 million loss for the half but says but revenue more than doubled as it expanded in Australia and the US
The buy now, pay later business reported 130% growth in revenue to $160 million in the December half, while its loss soared on last year’s.
The company said the revenue growth was driven by 42% expansion in its Australian business, and $57.6 million in revenue from the QuadPay business in the United States, which it bought in August.
It reported a statutory loss of $453.8 million, which it said included a number of non-recurring items.
Zip shares fell nearly 10% in an initial slide as investors were disappointed the loss was so big and that revenue growth was a bit light on.
The slide was part reversed and the shares ended down 7.6% at $10.95. The wider market was up 0.8%, so that was a day of underperformance for Zip.