Shares of ASX-listed buy now, pay later company Zip plunged sharply on Friday following the company’s disclosure of a fraud-related impact on its earnings in the key US market. At one point, the stock dropped 50 percent to a more than two-year low of $1.025 before recovering to close down nearly 30 percent at $1.46, wiping approximately A$760 million from its market capitalization.

Zip reported earnings before tax, depreciation, and amortisation (EBITDA) of A$65 million for the September quarter, which was 17 percent below analysts’ forecasts, primarily due to an “external fraud event” that added roughly A$10 million in costs. The fraud involved coordinated attempts by individuals using stolen but legitimate credentials to create new accounts and carry out unpaid transactions, the company said.

Zip’s chief executive Cynthia Scott stated that the fraud was identified and contained promptly. The company notified authorities and filed a claim with its insurer. According to Ms. Scott, the incident temporarily slowed total transaction volume (TTV) and customer growth in July and August, but performance improved significantly in September with TTV rising 41 percent year on year. For the quarter, TTV increased 18 percent to A$4.6 billion, with the US market registering a 34.1 percent rise in US dollar terms. Revenue grew 17 percent to A$376.1 million.

Despite the quarterly setback, Zip reaffirmed its full-year guidance of group cash earnings of A$340 million, representing a 26 percent increase from the previous year. However, net bad debts increased to 1.97 percent of total transaction volume, up from 1.65 percent a year earlier, with the US reporting a slightly lower figure of 1.93 percent.

Market analysts expressed mixed views on the results. Citi analyst Siraj Ahmed highlighted concerns about the company’s risk controls, noting that while fraud-related costs were one-off, the rise in bad debts and slower customer growth in the US raised some red flags. Ahmed acknowledged the encouraging rebound in September trading and the reaffirmed guidance but remained cautious.

RBC analyst Julian Mulcahy characterized the results as mostly positive, with key metrics such as transaction volumes, revenue, and yield exceeding expectations. He suggested that the increased loss rates were likely influenced by changes in customer mix and seasonality rather than systemic issues, and he noted Zip’s expectation of reduced losses in the current quarter.

UBS analyst Lucy Huang observed that the results were broadly in line with forecasts on revenue but pointed to the higher-than-expected increase in bad debts and fraud costs as negatives. She added that the company’s maintained full-year forecast reflected confidence heading into the key holiday shopping period.

The earnings update follows the sudden resignation last week of Zip’s US chief executive Joe Heck. Rory Herriman, previously chief technology and operations officer for the US division, was appointed president and interim chief executive. The stock’s sharp decline on Friday marked a continuation of a steep downtrend, with Zip having lost around 90 percent of its value since peaking above A$14 in 2021.