Openpay (ASX: OPY) has decided to pause its US operations indefinitely, blaming current macroeconomic conditions and the capital investment required to fund its US growth aspirations.
Simply put, there are far too many BNPL players amid a rising interest rate environment that’s squeezing margins. The once lucrative US BNPL market has turned into a cash-burning sinkhole that’s no longer feasible for small players like Openpay.
Openpay said it will withdraw from the UK market and seek a financial partner to support its existing US operations. Advanced discussions are underway, with several interested parties eyeing a transaction for a direct investment into Openpay US, according to today’s announcement.
As Openpay undergoes due diligence for a financial partner, its US operations will be indefinitely paused, loan originations will be ceased and its workforce will be ‘materially reduced.’
“This decision to shift our approach in the US was not taken lightly but will now allow even greater focus on Openpay’s Australian business which continues to perform strongly in terms of growth ...” commented CEO Dion Appel.
Openpay reaffirmed that its Australian business had a 'clear runway to profitability targeted for June 2023'.
Openpay shares are up 20.8% to 14.5 cents in early trade. Though, the company's stock remains down -96% from February 2021 highs of almost $5.
Openpay has a market cap of approximately $19m, with $27.5m in cash based off its March quarter update.
Even though the company is trading below cash, outflows for the current quarter and US restructuring costs could see a very different figure in the next trading update.
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