The Sezzle Inc (ASX: SZL) share price is rocketing out of its trading halt today following the successful completion of its $79.1 million placement. At the time of writing, Sezzle shares have jumped 23.9% to trade at $8.61 apiece.
Last week, Sezzle announced an $86.3 million capital raising, comprising a fully underwritten institutional placement to raise $79.1 million and a non-underwritten share purchase plan (SPP) to raise approximately $7.2 million.
What does Sezzle do?
Sezzle is a US-based business that provides an interest-free instalment payment solution. It has been operating since 2017, targeting the lucrative US market and more recently expanding into Canada.
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 success
Pricing for Sezzle’s placement was determined via a bookbuild process, which is the same approach rival Afterpay Ltd (ASX: APT) took when completing its $650 million placement last week.
Although Sezzle had an underwritten floor price of $5 per share, the placement was ultimately priced at $5.30. This represents a 23.7% discount to Sezzle’s last traded price of $6.95, however, it’s worth keeping in mind that the Sezzle share price rocketed 42% on Thursday last week before entering its trading halt.
Sezzle Executive Chairman and CEO Charlie Youakim said: “As a result of the Placement and the additional capital Sezzle is intending to raise under the SPP, Sezzle is now in an even stronger position for all of its investors, and very well placed to accelerate its growth strategy and undertake investment in initiatives to drive long-term value creation”.
What now?
Sezzle will offer existing shareholders the opportunity to participate in its SPP, with the intention of raising approximately $7.2 million. These shareholders will have the opportunity to apply for up to $30,000 worth of Sezzle shares priced at $5.30 apiece (in line with the placement price). The SPP is expected to open on Friday, 17 July 2020 and close on Tuesday, 4 August 2020.
Sezzle shares (and the buy now, pay later sector more broadly) have been on a tremendous run this year as COVID-19 accelerates the adoption of online shopping and the use of BNPL products as budgeting tools. With shares last changing hands at $8.61, the Sezzle share price has now jumped 312% so far this year.
With other BNPL shares experiencing similar recent success (see the table at the bottom of this article here), questions are increasingly being raised over whether BNPL shares are in a ‘bubble’. While there is certainly a lot of potential for this sector, momentum appears to be driving these share prices upwards, more so than fundamental analysis.
So if you’re looking to invest in more rationally priced tech stocks, check out the companies in the free report below.
[ls_content_block id=”14947″ para=”paragraphs”]
