Afterpay shares plummet after US regulator fine
Shares in financial technology company Afterpay have fallen 31% in one day after it was forced to pay a fine to refund US customers who paid late fees.
The buy now, pay later firm, which has been feted by many fund managers especially those in the small-cap space, said it would refund US$905,000 ($1,569,108) in late fees paid by Californian consumers within 45 days and pay a further 10% administration fee to the Californian Department of Business Oversight (DBO).
This followed an inquiry over whether the late fees to Californian consumers were ‘illegal loans’, a fact Afterpay disputed.
At the start of 2020, shares were trading at $30.60 but had since fallen to $12.76.
In an announcement to the Australian Securities Exchange (ASX), the firm said: “Afterpay agreed to pay settlement costs of $1.5 million, which were provided for in the company’s financial report for the half year ended 31 December, 2019.
These settlements costs include a refund of late fees previously paid by California consumers (approximately US$905,000) and an administrative fee of approximately US$90,500, an amount equal to 10% of the total late fees identified.
“Afterpay was granted the licence in November, 2019 to facilitate the expansion of service offerings in the US. Afterpay had been operating a consumer credit sale product in California, providing services that enable merchants to sell goods to their consumers that can be repaid over time. Afterpay rejects the view that the company operated illegally.
“While Afterpay does not believe such an arrangement required a licence from the DBO, Afterpay has agreed to conduct its operations under the DBO licence as part of this settlement.”
The company had a meteoric rise and was used by firms such as Sephora, David Jones and Country Road.
Since the company listed in July, 2017, shares had risen 984% to 31 December, 2019. This compared to returns of 27% by the ASX 200.
Share price of Afterpay since the start of 2020 to 18 March versus ASX 200
AUTHOR
Laura Dew
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