Can Before Pay woo BNPL investors?

Mon 06 Dec 21, 4:30pm (AEST)
Before Pay

Stocks in article


Share article

Key Points

  • Before Pay lends to consumer's and charges a fixed fee of 5%
  • Before Pay has increased its users 25% month-on-month to 125,000
  • Capital raising to support future growth.

Fasting growing pay-on-demand start-up Before Pay (ASX: B4P) is hoping to woo investors mid-January 2022 when it floats on the ASX with $35m IPO.

Listings in 2021 have had mixed blessings, with investors taking a fine-tooth comb to prospectus documents, which in recent years have been prone to over exaggeration.

It's understood the offer price for Before Pay's 10.2 million new shares is set at around $3.41. Initial market reaction suggests there's sufficient demand to attract those looking to tap into what many hope could be another BNPL darling stock like Afterpay (APT).

Based on the $3.41 offer price, Before Pay will list with a market cap of around $159m.

Fixed fee

Before Pay's business model is bit like factoring, but the end clients are consumers not businesses.

Instead of buying a company debtors ledger for a notional cost of say 10%, Before Pay lends on the strength of a consumer's next pay cheque, and charges them a fixed fee of 5% for the privilege.

Before Pay’s product has a broad use business case as the funds are provided to the customer as cash in their bank account and may be used for any purpose.

Chairman and ex-Westpac boss Brian Hartzer sees Before Pay less as a quasi-payday lender and more as a better way for consumers to manage their personal finances and gain access to “flexible, transparent” and “on-demand access” to credit.

Future profitability remains unknown

While Before Pay has increased its users 25% month-on-month to 125,000, the jury's out on exactly how profitable this business model will be.

During the FY2021 period, in which it commercially launched its product, Before Pay income was $4.5m with a pro forma historical net loss after tax of $19.6m.

Given that the company is currently in a growth phase, management argues that forecasting future financial performance with reliability is difficult.

The directors believe that given this growth phase and the uncertainties related to covid, it was not possible to include forecast financial information within the Prospectus.

Major untapped market

However, Before Pay believes the 125,500 users the company had at 31 October 2021 represents a small subset of Australians aged 20-54 with no/limited savings to whom the product is most likely to appeal.

Based on analysis by Frost & Sullivan in 2021, an estimated 5.3 million people within the 9.5 million individuals aged 20-54 employed in Australia could potentially benefit from short term, non-revolving access to cash due to their financial situation.

For example, according to the Frost & Sullivan’s survey, 24% of millennials were unable to raise $2,000 within a week if faced with an unexpected expense and 16% unable to even raise $500.

Before Pay plans to use its $35m capital raising to invest in additional customer acquisition, support growth in Cash Outs, invest in product and credit model refinements, and explore overseas opportunities.

Post the listing and conversion of all convertible notes to issued capital, Before Pay will have pro forma historical cash and cash equivalents of circa $50m and net assets of $54,780,095 as at 30 June 2021.

The Company does not currently intend to pay dividends.

Key dates   

Prospectus lodgement date Monday, 22 November 202

    Retail Offer opens Tuesday 9:00am, 30 November 2021

   Retail Offer closes Thursday 5:00pm, 16 December 2021

Settlement of the Offer Monday, 10 January 2022

   Allotment of Shares under the Offer (Completion of the Offer) Tuesday, 11 January 2022

    Expected despatch of holding statements Wednesday, 12 January 2022

      Expected commencement of trading on the ASX on a normal settlement basis Monday, 17 January 2022


Written By

Mark Story


Mark is an award-winning investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics, a diploma in journalism and has completed the Institute of Directors course. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content.

Get the latest news and media direct to your inbox

Sign up FREE