Buy-now deal collapse could mean selling later

Humm

12/07/2022 05:09

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are their own. Refiles to add links.)
    MELBOURNE, July 12 (Reuters Breakingviews) -
B uy-now-pay-later app Zip  ZIP.AX  just achieved a rare
distinction in the struggling industry: a higher valuation. Its
battered shares jumped as much as 13% on Tuesday after scrapping
https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fzip.co%2Finvestors%2Fasx-announcements&data=05%7C01%7CThomas.Shum%40thomsonreuters.com%7C3f6cd2c8c3e4414d0a1608da63bb3329%7C62ccb8646a1a4b5d8e1c397dec1a8258%7C0%7C0%7C637931952916018866%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=3zTm6YULyFqTlqLlMYjdQYFrxpN3F%2BF0DbkhyMY1ZyM%3D&reserved=0
 an all-stock deal to buy smaller U.S. rival Sezzle  SZL.AX ,
despite having to shell out $11 million to cover its target’s
legal and other fees and the loss of some A$130 million ($87
million) in promised synergies https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.breakingviews.com%2Fconsidered-view%2Fcapital-calls-pay-later-deal-buys-some-time%2F&data=05%7C01%7CThomas.Shum%40thomsonreuters.com%7C3f6cd2c8c3e4414d0a1608da63bb3329%7C62ccb8646a1a4b5d8e1c397dec1a8258%7C0%7C0%7C637931952916018866%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=ef2wT65XwZwiKMNcHR%2F1%2F6Dt%2BWybZJ1VKG9xK7wMxHo%3D&reserved=0.
    The mutually agreed termination highlights how quickly the
once-sizzling fintech business has cooled in the face of rising
interest rates, regulatory scrutiny and competition. Shares in
$6.1 billion microlender Affirm  AFRM.O  have plummeted 78% this
year. Sweden’s Klarna on Monday said https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.breakingviews.com%2Fconsidered-view%2Fcapital-calls-klarnas-slashed-valuation%2F&data=05%7C01%7CThomas.Shum%40thomsonreuters.com%7C3f6cd2c8c3e4414d0a1608da63bb3329%7C62ccb8646a1a4b5d8e1c397dec1a8258%7C0%7C0%7C637931952916175085%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=8Ssokr0zWWDtAEUeFs%2FYLg8qVHj6fGEbrf4IyHpOqpA%3D&reserved=0
 it raised money at a $6.7 billion valuation, an 85% discount
from last June. Australian payment provider Latitude  LFS.AX 
last month rescinded its offer to buy Humm’s  HUM.AX  consumer
division, which included its instalment-payment business.
    Zip reckons it’s still on pace to be profitable in a couple
years with some A$300 million in cash and liquidity. The company
told investors a few weeks ago that the Sezzle acquisition was
on track https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fzip.co%2Finvestors%2Fasx-announcements&data=05%7C01%7CThomas.Shum%40thomsonreuters.com%7C3f6cd2c8c3e4414d0a1608da63bb3329%7C62ccb8646a1a4b5d8e1c397dec1a8258%7C0%7C0%7C637931952916175085%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=5c7nDLsvoHdWJVXpvpsnsAUIW7YSJE%2BlJskVz4Zok0k%3D&reserved=0,
 however. It’s hard to know where to derive much optimism.
Perhaps not buying now will mean selling later. (By Jeffrey
Goldfarb)

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 (Editing by Pete Sweeney and Thomas Shum)
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