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Today’s debut of ‘Pay on Demand’ platform Beforepay (ASX: B4P) on the ASX has been anything but rosy, with shares in the fintech diving by around 42 per cent in the first hours of trading, wiping around $68 million off its value in the process.
Such are the whims of the market that the company’s largest shareholder and co-founder Tarek Ayoub, who owns his shares via an entity named Youbek, saw the value of his holding slashed by $8 million from $18.8 million today.
Founded in 2019 by Ayoub and Guo Fang Mao, Beforepay operates a fintech model dubbed ‘Pay on Demand’ whereby employed individuals can access a portion of their wages early which are then paid back over time on terms similar to buy-now pay-later.
The Sydney-based company generates revenue through customer fees equivalent to 5 per cent of the cash out, and does not charge customers late fees or interest - rather users can repay the loan over whatever time period suits them.
The ASX debut of Beforepay follows an oversubscribed initial public offering (IPO) where $35 million was raised at an offer price of $3.41 per share. In just hours, the company’s share price has fallen to around $1.96 per share.
Proceeds from the raise are intended to form the company’s balance-sheet position and will be used to pursue “accelerated growth” in Australia and potentially overseas with a particular focus on new customer acquisition.
Prior to the IPO Beforepay raised capital via private means, securing $9 million in January last year through a pre-IPO round and $2.8 million from investor James Spenceley in 2020.
In tandem with its ASX listing, B4P announced it is witnessing “strong momentum across key metrics” during the December quarter, with pay advances up 361 per cent to $77 million and active users nearly tripling to hit 139,100 people.
“I’m delighted to see Beforepay list on the ASX today,” said chairman of Beforepay Brian Hartzer, who was previously the managing director of Westpac (ASX: WBC).
“The strong support we’ve received from investors is testament to the growth Beforepay has delivered as a startup and the opportunity ahead of us as a public company.”
Alongside Hartzer, Beforepay’s board includes Luke Bortoli (formerly the CFO of Afterpay (ASX: APT)), while former Westpac chief strategy officer and chief data office Jamie Twiss is in the CEO seat.
The listing of Beforepay is yet another ASX debut of a loss-making company; in FY21 losses more than doubled to $18.8 million, down from $649,987 the financial year prior.
As at 30 June, Beforepay had $50.7 million in cash, $7 million in borrowings and $54.7 million in net assets.
According to the company’s prospectus, Beforepay anticipates “that further losses will be incurred…during its growth phase as it continues to invest and increase its market share”.
With its sights firmly on the future, Beforepay says it is hoping to capture a “significant market opportunity”.
“Beforepay’s product has a broad use case as the funds are provided to the customer as cash in their bank account and may be used for any purpose,” said the company in its prospectus.
“Supporting the broad use case is a strong demand for the product driven by emerging trends, including an increase in the use of smartphones to manage finances, declining credit card usage, and decreasing financial resilience.
“Further, populations in similar markets to Australia such as the United Kingdom and United States experience many of the same drivers as those underpinning demand in Australia.”
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