Why Afterpay Kicks off 2019 with a 4.6% Drop

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At time of writing, Afterpay Touch Group Limited [ASX:APT] shares are trading at $11.83, marking a 4.6% decrease from the trading price on the last day of 2018.

The Aussie financial tech company offers ‘buy now, pay later’ systems which retailers can offer their customers, that don’t involve upfront fees or interest.

2018 saw Afterpay’s share price soar by roughly 90%, with a 390% growth in the company’s revenue.

And yet, Afterpay has welcomed the new year on a sour note, with shares currently around 60 cents lower than the high reached on 31 December 2018.

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What caused the plummet

At the close of 2018, Afterpay released an Appendix to the Change of Director’s notice issued in early December. The appendix revealed the issuing of an additional 375,000 fully paid ordinary shares to the public.

This comes after the 2.7 million shares issued on 14 December 2018.

Afterpay are no doubt riding the wave of potential capital growth for the tech company thanks to its mind-blowing success in 2018.

However, while the issuing of shares tends to reflect positive and promising growth for a company, investors aren’t always happy with this outcome. From their position, issuing more shares has only diluted their ownership percentage in the company.

What this means for Afterpay

Despite today’s sign of souring sentiment, Afterpay does seem to have the potential to continue to grow as an innovative tech company. Securing a strong footing in the US market is a large part of this.

At the end of October 2018, Afterpay had over 900 American retailers signed up, and had processed AU$115 million worth of sales.

Alternatively, Afterpay may be pushing their luck in their prospects to enter the UK market. The volatility of the Brexit-nearing market seems to be a no-go zone for any newcomers, at least for the time being.

And of course, 2019 won’t be absent of inevitable market volatility, so it’s always important to check in regularly on stocks that you’re interested in.

Regards,

Ryan Clarkson-Ledward,
For Money Morning

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About Ryan Clarkson-Ledward

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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