v, Dec. 18, 2024 (GLOBE NEWSWIRE) -- Sezzle Inc., a buy now, pay later (BNPL) company, lost nearly a quarter of its market capitalization on December 18th following a damning report released by activist short seller Hindenburg Research, alleging that Sezzle has engaged in risky lending practices.
Shareholder rights firm Hagens Berman has opened an investigation into the allegations to determine whether Sezzle may have violated the U.S. securities laws and urges investors in Sezzle who purchased and suffered substantial losses to submit your losses now.
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Sezzle Inc. (SEZL) Investigation:
The investigation is focused on the sustainability of Sezzle’s business model.
Sezzle offers financing options that allow consumers to make purchases and pay for them over time, typically in a series of installments. Sezzle has ridden the BNPL wave of popularity over the past year, as rising inflation has forced shoppers to look for new and creative financing options. This has caused Sezzle’s stock to surge, climbing over 1,000% along with a rise in its merchant sales.
But on Dec. 18, famed short seller Hindenburg raised serious questions about the sustainability of Sezzle’s business model. Hindenburg notes that Sezzle is drawing against a line of credit with an exorbitant annual interest in excess of 12% to fund high-risk loans to subprime borrowers unable to get credit cards or access to other normal forms of financing.
Moreover, the report questions the sustainability of Sezzle's merchant partnerships. Hindenburg claims that key partnerships, such as the one with Target, have not materialized as expected. According to the report, the company's active merchant count has also declined significantly, raising doubts about its long-term growth prospects. To make matters even riskier, Sezzle’s Chairman and CEO has pledged $542 million in shares as collateral for a margin loan, representing ~30% of the company’s total shares.
The report claims Sezzle’s customer base has also contracted, with a 20% decrease in active customers since 2021. Despite this decline, the company has reported substantial growth in its subscription products. Hindenburg alleges that Sezzle may be artificially inflating its subscription numbers through questionable enrollment practices.
The report also highlights a spike in consumer complaints against Sezzle.
Hindenburg suggests that insiders recognize that Sezzle is a ticking time bomb, as insiders have sold approximately $71 million in stock this year, including a key pre-IPO investor who has reduced their stake by 87%.
“Hindenburg's allegations, if substantiated, could mean the company misled investors about its business model,” said Reed Kathrein, the Hagens Berman partner leading the investigation.
If you invested in Sezzle and have substantial losses, or have knowledge that may assist the firm’s investigation, submit your losses now »
If you’d like more information and answers to frequently asked questions about the Sezzle investigation, read more »
Whistleblowers: Persons with non-public information regarding Sezzle should consider their options to help in the investigation or take advantage of the SEC Whistleblower program. Under the new program, whistleblowers who provide original information may receive rewards totaling up to 30 percent of any successful recovery made by the SEC. For more information, call Reed Kathrein at 844-916-0895 or email SEZL@hbsslaw.com.
About Hagens Berman
Hagens Berman is a global plaintiffs’ rights complex litigation firm focusing on corporate accountability. The firm is home to a robust practice and represents investors as well as whistleblowers, workers, consumers and others in cases achieving real results for those harmed by corporate negligence and other wrongdoings. Hagens Berman’s team has secured more than $2.9 billion in this area of law. More about the firm and its successes can be found at hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.
Contact:
Reed Kathrein, 844-916-0895
