Payday loan fintech Beforepay saw the value of its $35 million IPO wiped out in its debut on the ASX today, with the company’s share price plunging 44% on its debut first day of trading.
Bidding early for the worst opening day of 2022 – the decline saw Beforepay (ASX:B4P) float to $3.41 per share but opened trading at $2.50 then closed the day at $1,905.
The float valued the company at $158.4 million. The drop erased about $70 million from its market capitalization, double the increase from the IPO.
The fintech first emerged in 2019 as Cheq, then raised $4 million later that year in a round led by Vocus founder James Spenceley. Two months later, in January 2021, it brought in investors for an additional $9 million in a pre-IPO round led by Alium Capital.
Beforepay offers a cash advance on your salary via an app. It charges a 5% fee and automatically deducts the loan from your bank account on your next payment. The company says it uses machine learning, artificial intelligence, and statistical analysis in its loan approval systems. It plays in a crowded market of cash advance lenders which also includes Fupay, WageTap and EverydayPay.
The company has done numerous television commercials using dinner date scenarios where a throatless man or woman meets a smartly dressed future, encouraging them to take an advance on Beforepay to buy lobster. The ads were criticized on ABC TV channels Grun by advertising guru Todd Sampson, who said, “What I find dark is that they almost admit they’re targeting losers.”
Co-founder Tayek Ayoub is Beforepay’s largest shareholder with an 11.84% stake. The fall erased more than $8 million from the value of his stake, which was worth $18.75 million, but closed a deal valued at $10.56 million.
Its co-founder Dean Mao holds 9.7%, Alium Capital, 6%. Spenceley, who sits on the board, chaired by former Westpac boss Brian Hartzer, is Beforepay’s 5th largest shareholder with 3.32%, which has gone from around $5m in value to $3m .
The company is led by former Westpac chief strategy officer Jamie Twiss.
While 12 months ago the company claimed to have around 200,000 users, the figure is actually 139,000.
The company provides an average loan of $260, which takes about 15 days to repay. Most notable in figures released before Monday’s float, the company said its credit default rate had fallen from 7% in December 2020 to 3% now. In its prospectus, the company generated $4.5 million in revenue, but wrote off a total of $5 million.
Loans more than quadrupled from $16.7 million in December 2020 to $77 million 12 months later.
Because Beforepay charges fixed fees rather than interest on loans, it is exempt from the National Consumer Credit Protection Act and does not fall under the National Credit Code. Last year, before the float, the company stopped lending to people whose main source of income was Centrelink social benefits.