Afterpay (APT) $114.80

UPDATED 02/08/2021 17:34

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APT +18.77% : The major news of the day / week / month, potentially year is US based Square taking out Afterpay (APT) in a deal valued at ~$39bn or $126.21 per share. representing a ~30% premium to the last close and ~21.9% to the 10 day VWAP. This deal is all ‘scrip’ meaning it’s all shares in the combined entity, it appears friendly and likely to go ahead with APT shareholders owning a then significant amount of SQ stock. The total consideration for APT is $39bn, for some context this is a top 15 ASX listed company being acquired at a record multiple of 23x forward sales or 41x current sales. For context Z1P’s international business at an equivalent multiple would be worth ~$9bn, or $15 (the international business only!)

So, who is Square? SQ is a massive payments company and a market leader across innovation in payments space, particularly through SME’s and digital payments started by Jack Dorsey of Twitter fame. SQ provides mobile payment solutions, develops point-of-sale software that helps in digital receipts, inventory, and sales reports, as well as offers analytics and feedback. If your neighbourhood bakery now accepts credit cards as well as cash, you might have Square to thank for the convenience. They provide hardware (a square-shaped card reader) and software to merchants and other service providers that enable them to accept credit card payments. The card readers attach to smartphones and tablets, providing a business with a low-cost point of sale system. Square’s software handles the backend of the transaction, making sure accounts square up between the merchant, the card company, the bank, and the consumer.

Square charges a per-transaction fee (its standard rate is 2.75%).

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Square products we all know well by now – source Square

LAST UPDATED 02/08/2021 17:27

The size of the transaction is huge for the ASX, however it’s also a big move from Square i.e. it’s not chump change for them. The below looks at Square’s financials over the past few years. This is now a company with a market cap of $US112bn taking out APT for $US29bn. In 2019, Square itself was worth $US27bn. The combined group will likely do revenue of ~$US24bn in FY22 growing at more than 20% a year. NB SQ’s current cash balance of $US3.6bn which explains why this is a scrip deal.