On Wednesday, shares of Australia’s Afterpay Ltd as well as its smaller consumer lenders tumbled for a second day following the entry of U.S. giant PayPal into the buy-now-pay-later sector which sent investors scrambling to re-price its stocks.
Shares of Afterpay fell by 12.4%, before paring losses. The company has lost nearly $1.8 billion A$2.4 billion in market capitalization in the two trading sessions since PayPal Holdings Inc said it would offer small, short-term loans to U.S. customers.
“Having such a large customer base already in the U.S., PayPal certainly throws a spanner in the works for their expansion plans,” said James Tao, a market analyst at CommSec in Sydney.
Shares of Zip Co Ltd, AfterPay’s rivals, dropped by 17.7%; shares of Sezzle Inc fell by 15.5% before trimming losses. Both have lost more than 23% in the last two days. Shares of Openpay Group Ltd and Splitit Ltd, each fell about 9%.
Afterpay and other alternative credit firms, which offer small installment loans to shoppers and make money by charging merchants a commission, are riding the boom in online shopping that has been sparked by the coronavirus pandemic.
PayPal’s is offering a fee and interest-free loan for purchases between $30 and $600, repayable in four installments over six weeks, broadly similar to Afterpay’s product, which has proven very popular among millennials.
Afterpay’s share prices surged by 900% since March 2020, catapulting it into Australia’s top 20 largest listed firms; this is despite the fact that it has never turned a profit.
Neither Afterpay, Sezzle, Zip Co, Splitit and Openpay immediately responded requests for comments.