The Splitit Ltd (ASX: SPT) share price is rising after the buy now, pay later announced its latest growth initiative.
What did Splitit announce?
Splitit said that it has signed a three-year US$150 million receivables warehouse facility with Goldmans Sachs to support the expansion of its business.
The company said that this supports its balance sheet and it’s a key element of the growth and capital management strategies for 2021 and beyond. The facility has a lower cost than Splitit’s existing funding and its use is expected to increase Splitit’s gross margins over time.
Splitit said that it will provide merchant funding for Splitit’s major markets along with a structure to facilitate additional jurisdictions over time.
The company disclosed that with this deal there are 13 million warrants with a strike price of $1.30 issued in three equal tranches, depending on the utilisation. Each tranche of warrants will expire 5 years after their respective issue date. The first warrant tranche will be issued on or about the first utilisation of the facility.
Splitit also said that there are other covenants, representations and warranties, and reporting obligations typical of a similar receivables warehouse facility.
Management comments
Splitit CEO Brad Paterson said: “This large committed facility from Goldman Sachs is a key pillar of our merchant sales volume growth strategy. Demand from merchants in the US and Europe for our funded model has never been stronger, and coupled with our existing strong balance sheet, we now have the foundations in place to accelerate our growth plans whilst also driving improved margins.”
Summary thoughts
It’s good that Splitit now has more ammunition for growth. This will support Splitit’s growth for the foreseeable future, now it just needs to find the merchants and consumers to use this new facility. The company is generating good growth each quarter.
Splitit’s market capitalisation is steadily heading towards $700 million. Is that a fair price for today? Perhaps. It’s hard to know what a good price for Splitit and the whole industry is, it depends how optimistic about your assumptions you want to be for growth and profitability.
In the payments space there are other ASX growth shares that I’d rather buy including Pushpay Holdings Ltd (ASX:PPH).
Instead of Splitit, I suggest getting a free Rask account and accessing our full stock reports. Click this link to join for free and access our analyst reports.
