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Why the Sezzle share price crashed 20% lower on Thursday

James Mickleboro
Share price plummet

The Sezzle Inc (ASX: SZL) share price has started the year on a very disappointing note.

In afternoon trade the buy now pay later company’s shares are down almost 16% to $1.76.

At one stage today Sezzle’s shares were down approximately 20% at $1.68.

Why is the Sezzle share price crashing lower?

Investors have been selling Sezzle’s shares after it provided an update on its California operations.

The release advises that the California Department of Business Oversight (DBO) has issued a public statement regarding its intention to not approve an application by Sezzle for a California Financing Law license to make loans.

What now?

Sezzle continues to operate in the state of California in partnership with retailers that originate retail instalment sales contracts and then assign them to Sezzle to service the payment processing.

Under this model, which is also widely used by the company’s competitors, Sezzle is operating as a sales finance company and does not make loans.

However, it does wish to change its approach in the future. As a result, Sezzle’s objective is to obtain the loan license in the near future so it can remove those merchants from the financing process.

It notes that the DBO has approved Afterpay Ltd (ASX: APT), which is operating under a similar sales finance model, between the dates of its application and the public statement. In light of this, it believes there is a path to a resolution.

Sezzle intends to continue to work with the DBO to correct any issues with its application in order to proceed with plans to develop a loan product in that market.

It stressed that it is committed to doing what is best for its partners and consumers and will work to resolve the issue quickly to reduce any potential impact on the business.

The post Why the Sezzle share price crashed 20% lower on Thursday appeared first on Motley Fool Australia.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020