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Sezzle (ASX:SZL) launches $86 million capital raising

Sezzle (ASX: SZL) has announced it’s launching an $86.3 million capital raising to accelerate its growth.

What is Sezzle?

Sezzle is a US-based and incorporated business that provides an interest-free instalment payment solution. It has been operating since 2017 and is now in 12 countries.

Sezzle listed on the ASX with an initial public offering price of $1.22 per share/CDI. The business does not charge interest or initiation fees, however it does charge failed payment fees of US$10.

Capital raising

Sezzle went into a trading halt yesterday so that it could make today’s announcement about a capital raising.

The buy now, pay later business wants to raise a total of $86.3 million. There will be a fully underwritten institutional placement to raise $79.1 million followed by a non-underwritten share purchase plan to raise approximately $7.2 million.

The price will be determined by a bookbuild process with an underwritten floor price of $5 per CDI (share). The floor price is a 28.1% discount to the last closing price of $6.95 and a 10% discount to the 5-day average share price.

New shares issued will represent just under 9% of the company’s existing issued capital.

What the money will be used for

It will be used for a variety of purposes:

It will be spent on additional business development, marketing personnel and other marketing costs.

Sezzle will hire additional developers and software engineers for enhancements and development for the Sezzle platform.

The BNPL business is expanding into Canada and it’s also looking at other markets as well.

It will also be used to strengthen the balance sheet, pay for the capital raising costs and potentially pay for the costs of refinancing its debt.

Should people buy shares?

Clearly this is a smart move by the company. It’s a good idea to raise capital whilst the share price is high.

I really don’t know if Sezzle is a buy or not. Has the BNPL gone into a bubble, or is the sector going to generate large profits in the next few years? Is there really going to be numerous large profitable operators, or will there be consolidation to just a few names like Afterpay and a couple of others? Maybe Sezzle will be one of the winners.

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.

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