Why did Split It payments rise over 100% today – should you ride the wave or short?

Split it payments (ASX: SPT) soared 125% today. That is right over 100% in a single day, which is remarkable. Especially as rising coronavirus cases, recession alarms, and US protests continue to infect the markets with fear. It only feels like yesterday that Zip CO (ASX:Z1P) skyrocketed. First Afterpay (ASX:APT), then Z1P, and now SPT, goes to show there is always a bull market somewhere.

Table of contents 
1. Why did SPT rise today? 
2. How does SPT differ from other BNPL businesses? 
3. Investment strategies - ride the hype or short?


Why is SPT going wild today?

Today SPT signed a multi-year contract with MasterCard Incorporated (NYSE: MA). However, what exactly does this agreement mean for Split it? First, “SPT can leverage Matercard’s network of partners to extend and scale instalment functionality to consumers and merchants.” (ASX announcements) However, the partnership extends beyond furthering SPT’s global reach (customer base). Mastercard and Split it intend to develop other instalmeent products in the future. Essentially, the companies will combine their resources to expand their respective product ranges. Ultimately, increasing potential revenue.

The bulls instantly recognised the significance of the partnership, driving SPT up to $1.51. The slight sell-off to $1.26 represents day traders off loading their gains. They probably saw it smarter to cash in on the profit instead of trusting in the future, which is extremely volatile (opinion not advice). However, the decrease caused an insurgence of even more bulls looking to ride the wave. Therefore, SPT skyrocketed today because of the partnership and investors looking to ride the wave towards the end of the trading day.

Split it payments business model

The potential SPT holds is within its unique variation to the BNPL industry. SPT directly charges your debit/credit account without the need for a middle man such as AfterPay or ZIP. This partnership with MasterCard concretes this business model, an exciting development in the fast evolving BNPL industry.

About SPT and its payment solution

“Splitit is a payment method solution enabling customers to pay for purchases with an existing debit or credit card by splitting the cost into interest and fee free monthly payments, without additional registrations or applications. Splitit enables merchants to offer their customers an easy way to pay for purchases in monthly instalments with instant approval, decreasing cart abandonment rates and increasing revenue.”

SPT Press Release 18/06/2020

The unique business model of SPT is an exciting attribute attracting long term shareholders. The MasterCard news solidifies the possibilities that SPT have been advertising to investors for years.

Is Split it payments worth the investment?

Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.

Short answer: Yes, however, timing is impeccable.

You could invest in SPT in three ways. Riding the hype, shorting, or investing for the long-term. (Opinion not advice).

Riding the wave

Investing now (buying low) to sell at a higher price is the most enticing but also the riskiest investing strategy. First, getting your hands on SPT’s shares will not be a problem. Because many investors will be selling their shares. However, many investors should ask themselves, why would investors buy your shares off you at a higher price? Honestly, in my eyes, there is no incentive for future buyers. Today’s volcanic activity represents buyers getting in off a positive announcement.

However, if another investor believes the stock will grow then you could make money.  Think of it as a pool of people all thinking the stock is up today, and it must go up right. Whoever in that pool gets in first often makes money off other traders who were too apprehensive. Classic example of first in best dressed. Overall, riding the wave could be successful, but be careful as it does hold considerable risk.

Shorting SPT

Considering the risks of riding the wave, many investors might gravitate towards shorting the stock. At a base level investing in the belief that a sell off is inevitable might seem attractive. Especially, as you would have rising coronavirus, recession alarms, and US social chaos posing the threat of market-wide fear. Thus, you might be able to predict the future stock movements of SPT. However, risk is still present. Because what is to say, the surfers riding the wave are not wrong, and the stock continues to rise. If that were the case you would be left with some nasty premiums on your SPT put options. Considering Z1P continued to surge after its Quadpay announcement, this is the rsik you take.

Investing in SPT for the long-term?

Honestly, Warren Buffet could not have said it better, “What is going to happen in a day, month or even a year I don’t know, nor do I believe is important.” Investing in SPT for the long-term is a completely different story. With long term intentions, you would not be as emotionally invested in short term fluctuations in SPT’s stock price, which the above two strategies are prone to.  If I was investing in SPT for the long term I would invest some capital with profits from the sell-off. Because a decline is inevitable, but the timing is anyone’s guess (opinion not advice). If the fear causes the markets to plummet again, I would pick up more SPT at a discount. Ultimately, bringing down my average price.

SPT has proven it can deliver on it’s exciting and dynamic business model, making it a stock to watch.

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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

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Written by Patrick McLoughlin, and Tyger Fitzpatrick, Senior Manager, and Founder of YIG.

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