Afterpay shares plummet after US regulator fine

19 March 2020
| By Laura Dew |
image
image
expand image

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

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 1 week ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 1 week ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 1 week ago

A Sydney-based financial adviser has been banned from providing financial services in the interest of consumer protection after failing to act on conduct concerns. ...

3 weeks 3 days ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

3 weeks 1 day ago

Having divested its advice business in August, AMP is undergoing restructuring in at least four other departments amid a cost simplification program....

2 weeks 5 days ago