Hindenburg Exposes Risky Loans and Insider Sell-Offs

Sezzle Inc. (NASDAQ:SEZL), the BNPL fintech, is under fire after a brutal report from Hindenburg Research wiped 21% off its stock, which now trades at $247.98. Hindenburg accuses Sezzle of funding its growth through loans at sky-high 12.65% interest rates to borrowers with poor creditconsumers who can’t access traditional financing. Merchant and customer numbers are also sliding fast, with active merchants down 51% since 2021. In contrast, competitors like Affirm and Klarna are pulling ahead. The report paints a picture of a company relying on unsustainable lending practices and quick fixes while its foundations crumble.

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Digging deeper, Hindenburg highlights that Sezzle’s CEO has pledged $542 million in shares30% of the company’s totalas collateral for a margin loan, a risky maneuver that raises eyebrows about leadership confidence. Insiders have sold $71 million in stock this year, fueling speculation of a lack of faith in Sezzle’s future. Consumer complaints are mounting, with reports of unwelcome subscription sign-ups and excessive fees tarnishing the brand. Despite its flashy 71% revenue growth, Hindenburg suggests Sezzle’s success is built on “short-term tricks” rather than a solid, scalable business model.

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Investors now face tough questions. With its shrinking market presence, risky lending strategy, and insider sell-offs, Sezzle’s outlook looks increasingly shaky. Hindenburg’s report underscores the risks lurking beneath the surface of what seemed like a fintech success story. For those watching the BNPL space, this is a clear signal to dig deeper before diving in.

This article first appeared on GuruFocus.