What’s the need?Obviously they are struggling to get quality...

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street talk

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14/05/20

14:03

Post #: 44619659
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Originally posted by tradingformils: ↑

Indeed, it's the only thing holding me back from loading up the truck.

I emailed investor relations last night but yet to hear back. I won't be surprised if I don't hear anything back, unfortunately. So if anyone here can get in touch with management to ask them how the business model really works, we would all benefit from finding out. The company is going into debt to provide cash acceleration to merchants via up front cash receipt at the time of sale, seemingly taking on bad debt risk. Even the company said when it raised $16M in capital on 30 April, "The proceeds of the Placement will enable Splitit to continue to execute its high-growth strategy by investing in go-to-market and technology resources, support existing merchant credit facilities and for general working capital."

So, while Splitit says it 'does not issue new credit or loans to consumers'...this is technically true, but it's a pretty crafty sentence. It doesn't provide credit to 'consumers', but it seems to issue credit to 'customers/merchants' to fast track 'consumer' purchases to entice consumers to use the Splitit platform of which it makes 70% (gross profit) of 3% on average per transaction.

Bottom line: Splitit seems to be issuing debt and equity to indirectly fund consumers and this, in effect, takes on bad debt exposure for the reasons argued in the last post. So if anyone has managements line directly, it's worth asking them why they issue shares and take on debt to fund merchants? What's the need??? It markets itself as having no exposure to bad debts and totally removed from the buyer-seller transaction. If anyone can shed more light on the complexity, I'd highly appreciate it.

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What’s the need?

Obviously they are struggling to get quality merchants on board and using splitit when they are either paid for the sale in instalments or need to enter into a factoring arrangement.

Paying the merchant upfront is the only way this model can get traction. This means having to borrow constantly, as APT, Z1P, OPY, SZL etc do and do plenty of cap raisings as the BNPL players are doing.

SPT will need to charge merchants more than the current rate as there’s no business model in borrowing higher than you charge. This means SPT now needs to invest more & more into their platforms to compete with BNPL players as a point of difference

Last edited by street talk: 14/05/20

SPT Price at posting: 40.5¢ Sentiment: Sell Disclosure: Not Held
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0 Great analysis

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