It shaved almost $70 million off the company’s valuation as consumers advocates warned younger generations are vulnerable to falling into debt.
Beforepay, a fintech that gives people an advance on their salary before payday, has suffered a horror entry to the Australian Stock Exchange after its shares plunged by 44 per cent from its original price offer.
The company’s share price plummeted from $3.10 to $1.90 beating last year’s record for the worst first-day performance on the ASX.
The brutal entry saw Beforepay’s market valuation drop from an expected $158 million to $90 million.
The fintech, which has around 139,000 users, has tripled its customer base in just 12 months and on average, customers borrow $260 and take 15 days to pay it back.
It has dished out $77 million in the last four months alone.
Services like Beforepay are particularly popular among the younger generation, with Finder research showing nearly a quarter of Gen Z Australians have used a pay-on-demand service to access their income earlier.
Meanwhile, Beforepay’s default rate sits just above 3 per cent after it stopped lending to Centrelink customers in an effort to improve the figure, after 7 per cent previously failed to make payments on time.
Last year, the company, which is chaired by former Westpac chief executive Brian Hartzer, raised $35 million from investors in its initial public offering.
Chief executive Jamie Twiss defended Beforepay’s performance on the ASX, saying “markets go up and down” and that prices were set back in November under very different trading conditions.
He added that the Aussie company has its eyes on expanding into bigger international markets.
“The US is probably the market we’re most seriously looking at. It’s an emerging category in the US,” he told The Australian.
“We’d like to see growth that’s rapid but we don’t want to be reckless with our investors’ funds or the money we’re lending out to customers.”
He added improved technology and data meant they have increased limits for “some of their most creditworthy customers“ in Australia.
“We’re attracting increasingly creditworthy and affluent customers who can manage a $200 pay advance the first time rather than $100,” he said.
But consumer advocates have called for better financial regulation for services such as Beforepay to protect vulnerable customers.
“Wage advance products are becoming more prevalent and are causing harm for some people,” Financial Counselling Australia said in a December report.
“Although distinct from BNPL, they use the same gap in the law to offer products without safe lending practices.”
However, Mr Twiss defended the company’s lending practices, saying that there is no rollover over of debt, nor does it charge late fees or interest rates.
Instead customers are required to pay back the initial loan, plus a flat fixed 5 per cent on top of that which does not increase, with the maximum amount that can be accessed $1000.
Investors dumping Beforepay’s shares reflects difficulties in other parts of the pay later industry, including Afterpay and Zip Co.
Last year, buy now, pay later providers revealed millions in losses and also took a beating on the stock market with shares plunging on average 80 per cent.
Afterpay reported a $156.3 million loss for the last financial year, which was up by almost 700 per cent compared to the last year. Rival BNPL service Zip also reported a $652 million loss, a whopping 3000 per cent increase on last year, where it had announced a $20 million deficit.
Originally published as Pay-on-demand lender Beforepay sees massive price dive on ASX debut
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