Buy-now deal collapse could mean selling later –


A logo for the companies Afterpay and Zip is seen in a store window in Sydney, Australia, July 9, 2020. REUTERS/Stephen Coates

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MELBOURNE, July 12 (Reuters Breakingviews) – Buy-now-pay-later app Zip (ZIP.AX) just achieved a rare distinction in the struggling industry: a higher valuation. Its battered shares jumped as much as 13% on Tuesday after scrapping an all-stock deal to buy smaller U.S. rival Sezzle , despite having to shell out $11 million to cover its target’s legal and other fees and the loss of some A$130 million ($87 million) in promised synergies.

The mutually agreed termination highlights how quickly the once-sizzling fintech business has cooled in the face of rising interest rates, regulatory scrutiny and competition. Shares in $6.1 billion microlender Affirm (AFRM.O) have plummeted 78% this year. Sweden’s Klarna on Monday said it raised money at a $6.7 billion valuation, an 85% discount from last June. Australian payment provider Latitude (LFS.AX) last month rescinded its offer to buy Humm’s consumer division, which included its instalment-payment business.

Zip reckons it’s still on pace to be profitable in a couple years with some A$300 million in cash and liquidity. The company told investors a few weeks ago that the Sezzle acquisition was on track, however. It’s hard to know where to derive much optimism. Perhaps not buying now will mean selling later. (By Jeffrey Goldfarb)

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Editing by Pete Sweeney and Thomas Shum

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