Laybuy fed up with ASX investors, set to delist and seek higher valuations privately

An ASX darling once upon a time, Buy Now Pay Later (BNPL) stocks are fading away from the spotlight. Endless hikes of interest rates, if not resulting in more bad debts, is turning away consumers from spending. With less and less demand and mounting bad debt write-offs, competition between BNPL providers is getting fiercer. Those who (financially) couldn’t keep up will have to make their way to the exit.

Laybuy Group (ASX: LBY) are among the unfortunate ones. It has only been two months since the Company reconfirmed expectations to be EBITDA profitable by March 2023, but that is not going to happen as the Company announced that it will be delisting from the ASX, pending shareholder approval. The costs and administrative burden outweigh the benefits of remaining listed on the ASX, according to Laybuy.

The low trading price of LBY shares, relatively low levels of trading liquidity, and number of consequences that negatively impacted the business sustainability, are among the reasons the Company wants to get away from public scrutiny as a listed company. 

Since Laybuy’s initial public offering (IPO) and listing in September 2020, the Company’s Board has observed ongoing fluctuations of the share price and noted that the value attributed to a share has been largely independent of news flows, even when positive news has been released. On news of the intended delisting, LBY shares tanked more than 30% to $0.04 which represents a 97% fall from the IPO Offer Price of $1.41.

The Company’s Board is particularly unhappy with how Australian investors value its shares. The Board believes that delisting would allow a more objective and independent appraisal of valuation to take place, without concern for an illiquid public market on the ASX.

Moreover, the composition of Laybuy’s share register combined with low market capitalisation and low liquidity have made it difficult for them to raise capital and attract broader institutional ownership. However, delisting from the ASX is believed to give the Company more access to a broader range of institutional investors including those who are unable to invest in ASX-listed companies due to investment mandates.

Laybuy’s decision to call it quits may surprise some, considering that things were seeming to be going well when Laybuy released its Half Year report in November 2022. Back then, Laybuy reported a strong growth in income, accumulating $25.9 million during the quarter which was an increase of 22.1% compared to the previous corresponding period (pcp). Falling fraud and defaults saw an improvement too, falling to 2.0% which was a reduction of 60bps pcp. The Company lost $13.9m on EBITDA but this was still an improvement of 35.2% pcp. 

The Delisting will be put forward for shareholder approval at a Special Meeting to be held on or around 22 February 2023.