Afterpay tries to stem share slide as scrutiny mounts

BENGALURU: Australia’s Afterpay Touch Group Ltd on has moved to stem speculation about adverse changes to the country’s payments regulation that have hammered its share price for several days, saying it was not currently subject to any inquiry by the central bank.

Afterpay was making its first statement since its shares began falling last week following a downbeat assessment from brokerage UBS and an announcement from the Reserve Bank of Australia that it planned to dig deeper into the buynow-pay-later (BNPL) industry next year.

Afterpay’s shares fell as much as 8.1% yesterday at A$27.25, its lowest level since Aug 28. They have dropped 25.5% since last

Wednesday when UBS initiated its coverage of Afterpay, valuing the company significantly under current market levels.

While Afterpay said on Monday it “is not currently subject to an RBA inquiry or review process”, it will be part of the central bank’s review of the payments industry in 2020.

Still, Afterpay asserts that it is not a traditional credit provider as its services extend far beyond the payment processing aspects of a transaction and are limited to certain purchases.

“Contrary to traditional credit models, Afterpay is a free service for customers who pay on time,” it said in a statement.

“Afterpay generates the majority of its revenue from merchants who choose to provide Afterpay as a service, rather than merely a form of payment.”

However, analysts said regulatory concerns would hang over the company, which is often seen as a bellwether of the BNPL sector.

“I believe there will be continued regulatory issues that are not going to be resolved anytime quickly,” said Brad Smoling, managing director at Smoling Stockbroking.

The BPNL sector has become a darling of stock analysts due to its scope for global expansion and online shopping growth.

Also attractive is its popularity among the Millennial and Gen Z populations because it provides easier access to credit than traditional routes.