BNPL play Sezzle announces $86m raising after share price rallies by 1,800pc

Sezzle (ASX:SZL) has joined in on the capital raising action in the buy now, pay later (BNPL) sector with a $US60m (~$86m) funding round.

About $79m of that came via a fully-underwritten institutional raise, with another $7.2m from a share purchase plan to eligible shareholders.

Sezzle said around two thirds of the funds would be deployed towards sales marketing activities and staff costs as it built out its software development team, as the US-based company eyes off an expansion into the Canadian market.

Some capital will also be deployed for balance sheet purposes, boosting cash levels and providing the capacity for further debt refinancing.

The underwritten component of the raise will be priced at $5, a discount of 28.1 per cent from Sezzle’s last closing price of $6.95.

At those levels, the stock has now risen by around 1,800 per cent from its March 23 lows of 37c.

The company said it had built “material scale” since its IPO in July last year, and is on track to hit underlying merchant sales (UMS) of $US1bn (~$1.4bn) by the end of the year.

Sezzle’s capital raise follows in the footsteps of competitor Afterpay (ASX:APT) earlier this week, which raised around $900m from institutional investors as co-founders Nick Molnar and Anthony Eisen sold down around $250m worth of stock.

Afterpay shares ripped higher again upon resumption of trade to climb above the $70 mark for the first time. The company continues to leave analysts divided, with broker price targets ranging from $25 (UBS) to $81.25 (Bell Potter) in the wake of the announcement.

The deal flow caps off a monster few months for the sector, with outsized gains for other listed competitors including Splitit (ASX:SPT) and Zip Co (ASX:Z1P).

While broader markets have also performed strongly in that time, investors were impressed by trading updates from various BNPL companies who all reported unexpectedly strong growth in user numbers through the teeth of the COVID-19 pandemic.

SZL, APT, SPT, Z1P share price charts: