Sezzle Stock Tumbles 21% On Hindenburg’s Short Report: Retail Chatter Shows Mixed Opinion
By Stocktwits Inc | First Published Dec 18, 2024, 11:51 PM ISTIn its report, Hindenburg said that the “buy now, pay later" firm is borrowing expensive capital to make extremely risky loans through a struggling platform that is rapidly losing customers and merchants.
Shares of financial technology firm Sezzle Inc (SEZL) tumbled nearly 21% on Wednesday after Hindenburg Research disclosed a short position on the stock. The firm cited the company's risky and lower-quality loans, insider-selling in its stock, merchants abandoning the platform, and customer decline, among other things.
Hindenburg said that the “buy now, pay later" firm is borrowing expensive capital to make extremely risky loans through a struggling platform that is rapidly losing customers and merchants.
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The report cited filings to argue that Sezzle borrows at a 12.65% interest rate to lend to extremely high-risk consumers “whose credit is so bad that they are unable to access traditional credit cards or loans and use BNPL options for otherwise everyday purchases.”
Hindenburg also claimed that merchants are abandoning the firm’s platform, with the company reporting only 23,000 active merchants, down 51% since 2021, according to its own disclosures. “Even these numbers may be exaggerated— we found only 6,776 merchants on its website,” it said.
The short-seller highlighted that the company has lost out on some of its key merchant partnerships. “For example, in October 2021, Target announced partnerships with Sezzle and Affirm where it would directly integrate Sezzle into its checkout. As of December 2024, PayPal and Affirm are the only BNPL options on Target’s checkout,” it said.
Another claim by Hindenburg refers to its active customer count declining by 20% since 2021.
“Overall, we think Sezzle has already been left in the dust by peers like Affirm, Klarna and Afterpay. The company has reported rosy numbers using short-term tricks, giving insiders an opportunity to exit. We do not see Sezzle surviving in the long-term,” the report said.
At the time of writing, Sezzle was yet to respond to the report publicly.
Despite the pessimistic report and the subsequent 21% tumble in the share price, Sezzle shares are still up over 11x year-to-date.
Hindenburg’s report also cautioned that Sezzle’s valuation has catapulted the company to a 5.5x forward sales multiple, which is way higher than most publicly comparable peers such as Zip, Dave, and Moneylion.
The report did manage to hurt retail sentiment on Stocktwits, pushing it into the ‘extremely bearish’ territory (4/100) from ‘neutral’ a day ago, accompanied by huge retail chatter.
The stock also found a place among the top 10 trending tickers on Stocktwits on Wednesday afternoon.
Retail chatter on Stocktwits reflected mixed opinions on the stock following the report.
Some users expressed caution on the stock.
Others, however, expressed optimism.
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