New Senate Inquiry, Why Afterpay Share Price Plummets 19%

Afterpay Touch Group Ltd [ASX:APT] share price took a nosedive late in trading yesterday after a strong start to the morning. Strong gains made at open were completely wiped out with the share price tumbling 18.93% to $11.35.

APT provides a retail centric, omnichannel retail service that facilitates transactions between merchants and their end customers. The service offers retail merchants to offer their customers the ability to buy products on a ‘buy now, receive now, pay later’ basis without the end customer having to apply for or enter into a traditional loan.

What caused the drop?

Afterpay has been a stellar performer recently but that performance came to an end late yesterday upon the announcement of a new Senate inquiry.

Sources have reported that the inquiry will focus on the parts of the financial sector that escaped the scathing of the royal commission.

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APT wasn’t the only fintech that was smashed yesterday. Payday lenders, debt management firms, and buy now, pay later platforms will also be subject to the new inquiry.

Other financial firms were also beat down following the news. Cash Converters International Ltd [ASX:CCV], Credit Corp Group Ltd [ASX:CCP], Money3 Corporation Ltd [ASX:MNY], and Zip Co Ltd [ASX:Z1P] also watched their share prices fall.

What’s next for Afterpay?

As with the banks and aged care sector, inquiries can negatively affect investor sentiment and ultimately the share price.

However, yesterday’s drop seems like a bit of an overreaction. Without a date even set for the inquiry, investors are jumping the gun.

Afterpay has released a statement saying it welcomed the opportunity to be involved, claiming to promote ‘responsible spending’:

Our model is unique in that we provide a free service to customers if payments are made on time, we do not charge interest, our instalment periods are short, and if payments aren’t made on time we immediately suspend a customer’s account which means they will never be caught in revolving debt’.

Afterpay said the model of buy now, pay later is being applied inconsistently in the market.

Regards,

Ryan Clarkson-Ledward,
For Market & Money

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Ryan Clarkson-Ledward is a junior analyst for Markets & Money. Ryan has degrees in both communication and international business. His priority is bringing you the latest price updates on stocks through ASX updates, as well as supporting Sam Volkering with background research. As part of the team at Markets & Money his aim is to provide unbiased and relevant news for readers. Ryan’s work with Sam is designed to provide research that complements Sam’s analysis for small-cap and technology stocks. Together, their objective is to break through all the jargon and give you the hard facts to inform your investment decision-making. Ryan writes for:


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