SYDNEY (Reuters) – Australian buy-it-now-pay-later company Zip Co Ltd said it was weighing an impairment charge on its newly acquired U.S. and European businesses and “deprioritizing” a cryptocurrency offering, a blow raised to the sector’s once-great growth prospects.

The company, which saw its shares soar during a COVID-19 online shopping spree, only to slump this year, also said it was exiting Singapore and halting corporate lending due to ” significant and rapid changes in the broader macroeconomic and capitalistic environment”.

The update reflects a deteriorating outlook for BNPL operators who have seen valuations plummet as inflation pushes up interest rates, squeezing consumption. This month, a fundraiser by Sweden’s Klarna valued it at $6.7 billion, up from $46 billion in 2021.

For Zip, Australia’s second-largest BNPL behind Block Inc’s Afterpay, the pandemic boom has spurred several acquisitions, including New York-based Quadpay, valuing the company at $269 million.

Zip then bought Dubai-based Spotii and the Czech Republic’s Twisto for a total of A$160 million ($110 million). He planned to buy rival Sezzle, before pulling out this month.

“Reflecting current market conditions, the company has reviewed goodwill against the Spotii, Twisto and Quadpay assets and is assessing the need to take an impairment charge,” the company said.

Zip did not give the amount of the potential charge, but CEO Larry Diamond said reversing the Sezzle takeover would see Zip, which has yet to report a profit, “achieve EBTDA profitability by species sooner than expected”.

Like many financial companies, Zip planned to tap into the growing popularity of cryptocurrency trading among younger customers by promising a digital asset trading platform by mid-2022. This was now “deprioritized”, he said.

In a limited business update, the company said net bad debts in Australia, which represent overdue payments of more than 180 days, increased to 3.82% of receivables as of June 30, from 3.4% on March 31, a “peak of losses”.

Zip shares rose 4.5%, against a flat market, but are still down 85% since January.

“Credit risks remain elevated,” UBS analyst Tom Beadle said in a research note, calling Zip’s market filing “another heavy trade update on revenue details without meaningful profitability metrics we need to assess Zip’s progress.”

($1 = 1.4501 Australian dollars)

(Reporting by Byron Kaye; Editing by Jacqueline Wong and Stephen Coates)

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