Fintech Beforepay Group Limited (ASX: B4P) has released its prospectus, marking the start of its much-anticipated initial public offer (IPO).
At $3.41 per share, the IPO will open for applications at the end of the month and the shares will commence standard trading on the ASX on 17 January.
The business name draws obvious comparisons to market darling Afterpay Ltd (ASX: APT), which is due to disappear from the ASX by March.
After a spectacular publicly listed life that saw the shares multiply more than 100 times since IPO, the buy now, pay later provider will be absorbed into US giant Square Inc (NYSE: SQ).
In contrast, Beforepay is effectively a payday lender, allowing users to access money before their actual pay packet lands.
As The Motley Fool previously reported, the business makes money from a 5% transaction fee and users can pay off the debt from the next paycheque or over 4 weeks.
Former Westpac Banking Corp (ASX: WBC) chief and Beforepay chair Brian Hartzer said the company offers a great alternative for Australians needing credit.
“Beforepay’s business model creates a strong value proposition for customers looking to take control of their finances without turning to credit cards or other forms of revolving debt.”
Burning cash for growth
The startup only started taking customers in August 2020, but already boasts 125,500 active users.
“Loss rates and costs continue to decrease and growth is increasing in both the acquisition and retention of a well-diversified customer base of working Australians,” Hartzer said.
“This demonstrates the broad appeal of the product and a sizable market opportunity.”
Make no mistake, Beforepay is currently burning cash in an early growth stage. It raked in $4.5 million of revenue for the 2021 financial year, while copping a $19.6 million net loss after tax.
The ASX listing will raise $35 million while giving the company a market capitalisation of $158.4 million.
The company was founded by former chief executive Tarek Ayoub, who in May handed over the reins to another former Westpac staffer, Jamie Twiss.
Ayoub will still hold 5.5 million shares after the IPO, representing an 11.8% or $18.8 million stake.
“The IPO will enable us to support more customers and to accelerate our growth, both in Australia and potentially overseas,” said Twiss.
“I’m proud of the scale we’ve achieved in just over 12 months. I believe that we’ve only just scratched the surface in terms of growth and have the right team to execute on our strategy going forward.”
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Motley Fool contributor Tony Yoo owns shares of Square. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO and Square. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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