Sezzle Inc.

Sezzle’s CDI Listed on ASX with 80% Premium:Sezzle Inc. (ASX: SZL) is a holding company of Sezzle Funding, a limited liability company, which was formed in, and registered under, the laws of Delaware, United States. The Company is registered as a ‘foreign company’ in Australia, under the Corporations Act, and named as Sezzle Inc.

Sezzle Inc. operates in the payments sector of the retail industry with its flagship payment platform, named as Sezzle which facilitates fast, secure payments between shoppers and retailers, via a short-term, interest-free instalment payment plan that delivers to shoppers both a budgeting and financing value proposition.

The company as on 30 July 2019, commenced its official quotation on a deferred settlement basis, following its oversubscribed IPO, with strong support across institutional and retail investors. The IPO witnessed a strong exuberance among investors, which were evident with applications for Sezzle’s CDIs substantially surpassing the target raising of A$43.6 million or US$30 million, resulting in significant scaling back of applications. The issue price was set at A$1.22 per CDI.

The stock opened at $2.50, made a high and low of $2.58 and $1.99, respectively and settled at $2.20. The indicative market capitalization on completion of the Offer (on an undiluted basis) was A$217.0 million (Total number of CDIs on the issue on Completion of the Offer x Issue Price, i.e., 177.9 x A$1.22 = 217 million). The settle price on 30 July 2019 at A$2.20 indicates the market capitalization of $391.38 million which is at ~80% premium of the earlier indicative market cap.

Deployment of Raised Fund:The Management intends to deploy the raised fund to support the SZL’s growth strategy, with main focus to identify and grab future growth opportunities via expanding SZL’s retail merchant base and product offerings which include funding for product development and engineering, sales and marketing, data sciences, merchant and customer support, and general administration.

Acknowledging the oversubscription of the IPO issue and listing on ASX at premium, the Management is of the view that the company will enable Sezzle platform to expand its operations and continue its rapid growth trajectory while playing a leading role in extending interest-free instalment solutions to consumers.

Operational Update for June 2019 Quarter:The company provided with the key operating metrics which have recorded strong growth on a Q-o-Q basis. Active Merchants and Active Customers posted a substantial growth of 52% and 59.3% to 5,048 and 429,989 at the end of 30 June 2019 as compared to 3,321 and 269,820 as on 31 March 2019. Underlying Merchant sales for the quarter stood US$41.91 million, posting a qoq growth of 47.9%. On the same line, Merchant Fees for the period came in at US$2.13 million with a qoq growth of 49.2%.


Operational Update (Source: Company Reports)

Top 20 CDI Holders:As per the update to ASX, the details of top 20 CDI holders are given below in the table. Charles G Youakim holds 49.68% of the total CDI units, followed by Continental Investment Partners LLC, who holds 5.84%.


Top 20 CDI Holders (Source: Company Reports)

Financial Reporting:The company will post its first half-year results after listing for the period ended 30 June 2019 which are scheduled to be released by 30 August 2019. Following this, first quarterly Appendix 4C for the September quarter is due for release by 31 October 2019.

Stock Recommendation: TheCDI of Sezzle Inc. listed on ASX with huge premium and settled at A$2.20 against the issue price of A$1.22. First day of trading on a normal (T+2) basis will take place on Thursday, 01 August 2019. With the listing of SZL’s CDI, the peer group such as Afterpay Touch Group Ltd (ASX: APT), Zip Co Limited (ASX: Z1P), Splitit Payments Ltd (ASX: SPT) were down by ~2.09%, ~2% and ~5%, respectively as on 30 July 2019.
Although the‘buy?now, pay?later’ segment, the company is engaged with, is quite attractive and peer set had taken aback with the commencement of trading as on 30 July 2019, we are of the view that premium at which the CDI has been placed currently, is likely to cool down in a mild manner. Hence, we have a watch stance on the stock at the current price of A$2.20 as on 30 July 2019.

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