Thread by @HindenburgRes

NEW FROM US:

Sezzle – A Failing "Buy Now, Pay Later" Platform Playing Short Term Tricks As Insiders Cash Out Via Stock Sales And Margin Loans

$SEZL

(1/x)hindenburgresearch.com/sezzle/

$SEZL is a Minneapolis-based Buy Now, Pay Later (BNPL) company founded in 2016.

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$SEZL is up 2,015% in the last year, driven by investor confidence that it is a growing, profitable business that recently reported 71% year-over-year revenue growth.

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$SEZL trades at a premium 5.5x forward sales multiple, representing a 63% premium to peers, based on these lofty expectations.

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But in reality, our findings show $SEZL is borrowing expensive capital to make extremely risky loans through a struggling platform that is rapidly losing customers and merchants.

All the while, insiders are selling stock or cashing out though a massive margin loan.

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$SEZL's Chairman and CEO has pledged $542 million in shares as collateral for a margin loan, representing ~30% of the company’s total shares, as disclosed in an obscure footnote on page 42 of a September 2024 proxy statement.

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Insiders have sold ~$71 million in stock this year, including a key pre-IPO investor who has reduced their stake by 87%.

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In 2019, $SEZL listed in Australia, where it faced accusations of being highly promotional, withholding negative information from shareholders and engaging in high-risk lending.

The stock collapsed following reports of significant bad debts & speculation of bankruptcy.

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Despite its collapse in Australia, as it prepared for its move to Nasdaq, $SEZL was able to report profitability in February 2023, partly by recording significantly lower provisions for bad loans.

The company listed on Nasdaq in August 2023.

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However, filings show $SEZL borrows at a 12.65% interest rate to lend to extremely high-risk consumers whose credit is so bad that they are unable to access traditional credit cards or loans and use BNPL options for otherwise everyday purchases.

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$SEZL earnings growth in 2024 was significantly driven by issuing lower-quality loans, despite consumers already being stretched w/ rising credit card delinquencies.

While Sezzle’s loan book grew by just 6% year over year, its provisions for credit losses grew by 130%.

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Sezzle’s COO and "Head of Risk" has no apparent prior corporate experience, per his SEC biography, and was previously a teaching specialist at the University of Minnesota.

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Merchants are abandoning Sezzle’s platform, with the company reporting only 23,000 active merchants, down 51% since 2021, per its own disclosures.

Even these numbers may be exaggerated—we found only 6,776 merchants on its website.

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Despite loud announcements at signing, key merchant partnerships such as Target, Lamps Plus, Bellacor, and Ministry of Supply seem to have quietly failed.

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For example, in October 2021, Target announced partnerships with Sezzle and Affirm where it would directly integrate Sezzle into its checkout.

As of December 2024, PayPal and Affirm are the only BNPL options on Target’s checkout.

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Beyond losing merchants, Sezzle has also seen its active customer count decline by 20% since 2021, all while key competitors grow rapidly.

Oddly, despite this, the company has reported 2.5x growth in its subscription products, which represented 33% of last quarter’s revenue.

$SEZL seems to be boosting near-term subscription numbers with sketchy enrollment practices.

It has faced numerous customer complaints for enrolling users into recurring monthly subscriptions without their awareness, according to user complaints & the company’s own FAQ.

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Meanwhile, consumer complaints about Sezzle are spiking, with the company receiving a 1.1-star average rating and 986 complaints over the last three years on the Better Business Bureau (BBB) database.

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Overall, we think $SEZL has already been left in the dust by peers like Affirm, Klarna and Afterpay.

The company has reported rosy numbers using short-term tricks, giving insiders an opportunity to exit. We do not see Sezzle surviving in the long-term.

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We are short shares of $SEZL. Please see our report for our full disclaimer.



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