The Splitit share price plunged 20% on Wednesday

Is the Splitit Ltd (ASX: SPT) share price coming back down to earth after soaring 1000% in just over a month?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Splitit Ltd (ASX: SPT) share price plummeted 19.75% on the ASX on Wednesday to close at $1.30.

This comes after the Splitit share price touched a high of $2.00 on Monday marking a spectacular 1000% return in just over a month since floating on the ASX.

What happened?

It appeared to be the IPO that had it all. A payment platform with a twist where shoppers can split their purchases into up to 36 interest-free monthly payments using their existing Visa or Mastercard. Successful predecessors like Afterpay Touch Group Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P).  And let's not forget a pun intended name.

The company recently announced its full-year results for the fiscal year ending December 31, 2018. The report highlighted a 203% increase in revenue to US$789,920 but a net loss of $4,405,459. This equates to a loss per share of 29.45 cents.

Given the company's approximate market capitalisation of $280 million and 173 million shares on issue, this would place the company at x284 times CY18 revenue.

While it does sound all doom and gloom, the payment platform sector and Splitit are in its early days. Like many other successful and red-hot IPOs in the past, the Splitit share price has inflated miles past its valuation and experiencing one of many pullbacks.

A less extreme and recent example of a successful IPO imploding was Keytone Dairy Corporation Ltd (ASX: KTD).

Keytone was at the very least EBITDA positive and using IPO funds to expand existing production capacity for dairy-related products. The issue price was also A$0.20 each to raise a maximum of $15 million. The share price reached a peak of $0.870 in two months before finding some consistency around the $0.40 mark.

Foolish takeaway

To those investors who are considering buying Splitit shares for a bounce or as a speculative buy, I would be avoiding the hype and bandwagon and taking a wait and see approach. In my view, it's probable that the stock could continue to be sold down as investor interest dwindles.

Instead, why not check out these 3 dividend stocks rated as buys by the experts at Motley Fool Australia.

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.

More on Share Market News

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why DroneShield, Gentrack, Metals X, and Northern Star shares are tumbling today

These shares are ending the week in the red. But why?

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Broker Notes

Morgans says these ASX can rise 30% to 50%

The broker has good things to say about these shares.

Read more »

Two businessmen look out at the city from the top of a tall building.
Broker Notes

2 ASX REITs to buy in July: expert

Is it time to consider ASX REITs?

Read more »