Australian fintech OpenPay has become the first buy now, pay later (BNPL) service to collapse as the tech wreck continues to wreak havoc.
On Monday, the BNPL provider announced to the Australian Securities Exchange (ASX) that it had gone into receivership.
It followed OpenPay pausing trading on Wednesday in a sign that the company was on its last legs.
The appointed receivers, Barry Kogan, Jonathan Henry and Robert Smith of insolvency firm McGrathNicol, have put a stop to the business although customers will still have to keep paying off their debts in instalments. New purchases cannot be made through the platform.
Its collapse could potentially leave dozens of Australian retailers out of pocket as receivers have not confirmed if the stores where it offered its services will be getting their money back. OpenPay had a number of different retailers including Bunnings, Bupa Dental, Glue Store, and Kogan.com.
The news of the ASX-listed BNPL firm’s demise first sent the sector into meltdown in national markets.
OpenPay paused when it was at 20c per share. One of the major BNPL players, Sezzle, dropped by 2.99 per cent yesterday to trade at 65c a share while rival company Zip dropped by 2.22 per cent to 66c per stock at time of writing.
OpenPay had been struggling for some time, with ASIC documents showing it had not turned a single profit since its debut on the Australian stock market in 2019.
Its latest quarterly report showed that the company had racked up $18.2 million in operating losses.
In the past year, the Australian fintech had no choice but to pull out of the UK and it was trying to sell its US branch as it scrambled to survive.
Worse still, last week, Openpay revealed that it was having problems getting hold of $41 million of financing, prompting the market pause.
This left them with a balance of $17 million, which breached its loan agreement, causing two secured creditors, OP Fiduciary and Amal Security Services, to initiate the receivership.
News.com.au contacted the receivers, McGrathNicol, for comment.
Although the news has sent shockwaves through the sector, OpenPay was undoubtedly a smaller player than some of the other BNPL firms.
OpenPay was recently valued at $45.4 million while Zip is worth $512.8 million and Afterpay has a valuation of $14.8 billion.
Josh Gilbert, Markets Analyst at eToro, said that this was an epic fall from grace for OpenPay and the wider BNPL industry.
“The BNPL sector went from ‘hero to zero’ amongst investors,” he said.
“As inflation climbed and interest rates soared, share prices crumbled. Disruptive tech especially has felt the full force of liquidity being drained for financial markets over the last two years as investors rotated out of risk assets.
“With competition rife in the marketplace and increasing regulation – plus disadvantageous conditions in the macro environment, there were unfortunately always going to some businesses that would succumb to the pressure.”
In the past six months, Australia’s tech industry has been caught in the throes of a crisis as investors have been left spooked by dramatic plunges in valuations making funding harder to find.
The current market conditions has seen many companies, big and small alike, cut jobs or go under as they struggle to stay afloat in the turbulent market.
Other companies have also collapsed leaving the Australian public stunned, including Deliveroo’s Australian arm, a neobank called Volt Bank, grocery delivery giant Send, a Melbourne-based e-sports company called Order despite raising $5.3 million funding and AI platform Metigy, which went into liquidation owing $32 million.
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