Afterpay Bonds – How does the pricing work?
Could you please explain the recent funding in Afterpay? Reference price approx $135, conversion price in 5 years approx $195 ? Cheers Graham
The Latest Q&A
Answer
Hi Graham,
Essentially a $1.5b in investment was made in Afterpay, earning no interest over the period, and either being repaid in full, or paid back in shares priced at ~$194, what was a 45% premium to APT shares at the time.
The risk to APT is that shares are materially higher than $194 come March, ’26 so to hedge that, the company buys enough shares today to cover those potentially due at expiry. Fortunately for APT, the Co-CEO’s were more than willing to sell 450,000 shares each at the Reference Price of $134.36.
For the note holders, they give up $1.5b to either get their money back in 5 years for no loss, or shares in Afterpay for $194 a pop. For reference, shares listed in 2016 for $1 a pop. On simple terms that’s a ~13400% rise in 5 years – note holders would be well in the money if that effort is matched through to 2026. Convertible notes are listed in Singapore which is common for these type of deals.
