• Sezzle Inc. is a Minneapolis-based ‘Buy Now, Pay Later’ (BNPL) company founded in 2016.
• Its stock 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.
• Sezzle trades at a premium 5.5x forward sales multiple, representing a 63% premium to peers, based on these lofty expectations.
• But in reality, our findings show Sezzle 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 through a massive margin loan.
• Sezzle’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.
• Insiders have sold ~$71 million in stock this year, including a key pre-IPO investor who has reduced their stake by 87%.
• In 2019, Sezzle listed in Australia, where it faced accusations of being highly promotional, withholding negative information from shareholders and engaging in high-risk lending. The stock later collapsed following reports of significant bad debts and speculation of bankruptcy.
• Despite its collapse in Australia, as it prepared for its move to Nasdaq, Sezzle was able to report profitability in February 2023, partly by recording significantly lower provisions for bad loans.
• However, filings show Sezzle 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.
• Sezzle’s earnings growth in 2024 appears significantly driven by rapidly issuing lower-quality loans, despite U.S. consumers already being stretched thin with rising credit card delinquency rates. While Sezzle’s loan book grew by just 6% year over year, its provisions for credit losses grew by 130%.
• 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.
• 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.
• Despite loud announcements at signing, key merchant partnerships such as Target, Lamps Plus, Bellacor, and Ministry of Supply seem to have quietly failed.
• 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.
• 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.
• Sezzle seems to be boosting its near-term subscription numbers with sketchy enrollment practices. The company has faced numerous customer complaints for enrolling users into recurring monthly subscriptions without their awareness, according to user complaints and the company’s own FAQ.
• 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.
• Overall, we think Sezzle 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.