Bye-bye BNPL bubble ??
One of the marvels of buy now, pay later (BNPL) is being able to buy certain dark necessities when you need them. Like tickets to the Red Hot Chili Peppers the second they go on sale, instead of waiting for payday and missing out on the best spot (the mosh pit, obvs). ??? But behind the scenes the BNPL industry is in chaos.
It turns out it can be hard to stand out in the business of instalment payments, and the crowded market is leaving a trail of scar tissue. Other problems are also piling up around the world. Rising interest rates, slowing spending, a sharp rise in people missing repayments and Gen Z’s spiralling debt have all been taking bites out of lenders. Late payments can be a source of revenue for lenders that charge penalty fees, but too many missed payments and bad debts can swamp companies. ??
Shares in US lender Affirm (AFRM) have tumbled 76% this year. Australian listed lender Sezzle has fizzled, with their share price losing 93% of their value. Closer to home, Laybuy Holdings has lost 81% of their market valuation this year and is reportedly hunting for more cash to stay afloat after growing losses. It’s enough to drive the industry to drink. Unfortunately, a trip to the bottle shop and an offer of in-store booze financing hasn’t gone down well at all, inviting regulators to start circling the waters like sharks. ?? Gulp!?
Was it all a bubble? Some think so. It was certainly a boom at a time when market conditions were favourable. With low interest rates, a surge in consumer spending and monster estimates of US$7.2 trillion in BNPL transactions by 2025, there was a lot of excitement from companies eager to get involved. But, for now, it feels unlikely that BNPL will disappear under the bridge completely any time soon. ??
Is The Great Unsubscribe coming? ??
We’ve survived The Great Resignation, but could we be about to hit The Great Unsubscribe? ?? Subscription services have been sneaking their way into our lives (and our wallets) big time over the last few years. It’s been a subscription apocalypse, with everything from pet food to heated car seats (thanks, BMW ??) and they can add up fast. According to Pyments.com the average consumer in the US had five retail subscriptions at the end of 2021, costing an average of US$187 per month per person. ??
It’s looking like some subscription services might be put on the chopping block as the cost of living rockets and more of us juggle to pay for the essentials. ?? Are Millennials really to blame? Over in the UK, a reported 1.5 million households are cancelling TV streaming subscriptions to save money, while earlier this year Netflix (NFLX) warned of losing up to 2 million subscribers in the second quarter. ‘TikTok and chill’ might not have the same ring to it, but it doesn’t cost $25 per month either.
Consumers are also watching their wallets ahead of their weight. Weight Watchers (WW) says their digital subscription revenue slimmed down in the first quarter of this year as ‘poor consumer sentiment’ drove subscription revenue to fall 6%. Interestingly, ‘poor consumer sentiment’ hasn’t been a problem for Onlyfans, which last month said they haven’t seen any slow down in subscribers. ??
Over at Spotify (SPOT) subscribers have been holding up as well …for now. The company has said they expect premium subscribers to grow in the second quarter of 2022. Yuss, music is life! ?? Still, a report by research firm Kantar last month suggests younger streamers are increasingly turning down the music, with three of the top five reasons for cancelling subscriptions linking back to saving money. Investors will certainly be listening out for any signs of trouble as quarterly earnings get reported over the next month. ??
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3M digs deeper ??
Seems not even Scotchgard can protect maker of passive aggressive fridge notes and life saving scrubs, 3M (MMM), against legacy industrial woes that have followed them to Europe. ?? Like fellow industrial giants DuPont (DD), The Chemours Company (CC) and Corteva (CTVA) - who fronted up to ‘decades-long deception’, last year jointly forking out US$4 billion to settle fresh lawsuits related to ‘forever chemicals’ - industrial conglomerate 3M has found themselves in dark waters.
The problem? Perfluoroalkyl and polyfluoroalkyl, or PFAS. These are synthetic chemicals used to make eggs not stick to frying pans, create water resistant clothing, fire fighting foam and even cosmetics. ?? They’ve been shown to build up in blood streams and are linked to serious harmful health effects in animals and humans - even passing through mother’s milk to babies. ???
From 1976 to 2002, American behemoth 3M produced PFAS in Antwerp, Belgium. Roll on 20 years, and a dogged US$4.8 billion tunnel project has unearthed ‘extraordinary levels of toxins’, with PFAS now found in residents’ bloodstreams. In the US, 3M admitted to ‘unlawful release’ of PFAS and has paid out millions to settle cases. In Belgium, the multinational tried to hide land contamination but was caught out during secret handshake deals. ?? This July they brought a not-so-‘lame-ass offer’ to the table, agreeing to payout US$582 million. They’ve also been ordered to remove 1.5 metres of garden topsoil impacting around 1,000 residents who live near the 3M chemical plant. And they may yet face criminal charges with the possibility of prison sentences. ??
3M’s already been digging a hole in the share markets, with their stock price steadily falling 44.7% since 2017 and tumbling 28% in the first half of 2022. ??? In January, they paid out US$110 million in damages for allegedly defective earplugs and a further US$77.5 million to one veteran, with another 100,000 affected veterans filing proceedings. Share price drops are not unusual in today’s climate. But 3M’s costs keep piling up, with some saying they may exceed US$1 billion. Things that don’t make you go mmm…
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