Sezzle's share price plummeted by 40% in December.
Sezzle's stock plummeted by 39.7% in December, as per S&P Global Market Intelligence data. The downturn began in November upon the company's stock offering. However, the significant drop continued post-December 18, following a damning short report published by Hindenburg Research.
The report raised several red flags, painting a grim picture of Sezzle's business model. While Sezzle's services have garnered popularity by allowing users to purchase items in four installments at select retailers, the firm earns its primary income through merchant fees. Additionally, Sezzle offers a subscription product for enhanced features.
Notably, Sezzle caters to individuals with poor credit, but this is one of the aspects that Hindenburg Research critiques. The report suggests that Sezzle is offering high-interest loans to high-risk clients, which could potentially strain their financial situation if default rates rise.
Hindenburg Research's conclusion, highlighting the unsustainability of Sezzle's model, has left shareholders grappling. Investors are tasked with understanding Sezzle's business model, financial performance, and productivity drivers to formulate an investment strategy.
As Sezzle navigates the fallout from Hindenburg's report, watchful investors should monitor the company's subscription base, looking for a fluctuation in growth numbers. Should the subscriber base reach a peak in the coming months, it might confirm suspicions of non-genuine sign-ups. On the other hand, continuous growth would hint at potential upside.
In concluding, Sezzle's business model faces numerous concerns, including risky lending practices, declining merchant partnerships, and customer base reduction, as well as insider stock sales, valuation concerns, and allegations of inflated subscription numbers. Investors are advised to remain cautious as they examine Sezzle's future performance.
The damning report published by Hindenburg Research mentioned Sezzle's reliance on high-interest loans to high-risk clients as a potential financial risk for 2023. Despite Sezzle's popularity for allowing users to purchase items in installments, the company primarily earns income through merchant fees and a subscription product for enhanced features. Many investors are now hypothesizing about Sezzle's true financial health and future performance, with the company's stock prices significantly affected by these concerns. After Sezzle's stock plummeted by 39.7% in December, watchful investors are closely monitoring the company's subscription base for signs of growth or decline, as it could potentially hint at potential upside or suspect non-genuine sign-ups.
