Sezzle: A Failing “Buy Now, Pay Later” Platform Playing Short Term Tricks As Insiders Cash Out Via Stock Sales And Margin Loans - Hindenburg Research
Sezzle Inc. Faces Allegations of Fraud and Declining Fundamentals: Hindenburg Research Exposes High-Risk Lending Practices, Insider Selling, and Questionable Growth Tactics in Scathing Report.
Hindenburg Research's latest report unveils alarming practices at Sezzle Inc., a Buy Now, Pay Later (BNPL) company, suggesting potential fraud and imminent stock collapse.
Stock info:
- Ticker: SEZL (NASDAQ)
- Position: Hindenburg Research is short Sezzle Inc.
Why it matters:
- Sezzle's 2,015% stock surge contradicts declining fundamentals: 51% merchant loss, 20% customer decline since 2021
- CEO pledged $542M in shares for margin loan; insiders sold $71M in stock, signaling lack of confidence
- High-risk lending practices: 130% increase in credit loss provisions despite only 6% loan book growth
- Borrowing at 12.65% interest to fund subprime loans amid rising consumer credit delinquencies
- Questionable revenue growth driven by potentially deceptive subscription practices
Catch up quick:
- Sezzle's COO and "Head of Risk" lacks traditional corporate experience, previously a teaching specialist
- Only 6,776 merchants found on Sezzle's website, despite claims of 23,000 active merchants
- Average 1.1-star rating on Better Business Bureau with nearly 986 complaints
- Key partnerships with Target and Lamps Plus appear to have failed
FAQs:
What is the main concern Hindenburg Research raises about Sezzle?
Hindenburg Research highlights Sezzle's high-risk lending practices, insider selling, declining customer and merchant base, and potential fraudulent behavior in reporting growth and profitability.
How has Sezzle's stock performed recently?
Sezzle's stock has surged 2,015% over the past year, which Hindenburg argues is unjustified given the company's declining fundamentals.
What evidence suggests insider lack of confidence in Sezzle?
The CEO has pledged $542 million in shares for a margin loan, and insiders have sold approximately $71 million in stock in 2024, including a key pre-IPO investor reducing their stake by 87%.
How does Sezzle's valuation compare to its peers?
Sezzle trades at a premium 5.5x forward sales multiple, significantly higher than its BNPL peers, despite its declining market share and customer dissatisfaction.
What are the main issues with Sezzle's lending practices?
Sezzle borrows at a high 12.65% interest rate to fund loans to high-risk consumers, with provisions for credit losses growing by 130% year-over-year despite only 6% loan book growth.
Has Sezzle faced similar scrutiny before?
Yes, Sezzle faced accusations of being highly promotional and engaging in high-risk lending during its operations in Australia, mirroring current concerns in the U.S. market.
What customer-related issues does Sezzle face?
Sezzle has received numerous complaints about involuntary subscription enrollments and excessive fees, leading to a poor average rating of 1.1 stars on the Better Business Bureau.
How has Sezzle's merchant and customer base changed recently?
Sezzle has lost 51% of its active merchants since 2021 and experienced a 20% decline in active customer count, while competitors continue to grow.
Disclaimer
This summary is based on a report by Hindenburg Research, a firm specializing in forensic financial research. For the full, detailed analysis, please refer to the original source material: https://hindenburgresearch.com/sezzle/
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