Buy now pay later provider Afterpay’s share price is down 2.81%, trading at $28.37 at the time of writing.
Afterpay Touch Group Ltd’s [ASX:APT] share price was recovering from a mid-October slump prior to the announcement:
We take a look at Afterpay’s most recent business update and the details of its strategic partnership with Coatue Management.
Afterpay is one of our favourite fintechs for good reason. Learn more about the company and two other challengers leading the breakup of the big banks in this report.
Highlights from business update push Afterpay share price up again, only to fall
With the announcement released prior to trading, the Afterpay share price rose as high as $31.64 before quickly slumping to its current level.
Here are the main points from the business update:
- Underlying sales of $2.7 billion, up 23% on last quarter
- Active customers of 6.1 million, up 32%
- Active merchants of 39,450, up 22%
The company said that they have signed Australian retailers Myer (in-store) and David Jones (in-store) to the platform.
The company also noted more than 9,000 active or currently integrating merchants in the US and 330 in the UK market.
Its health services segment now has 2,500 dental and optical practices using the platform in Australia.
However, it is possible that the details of its new strategic partnership Coatue Management may have played a role in some investors selling their shares today.
Here are the key features of the deal:
- $200 million private placement with the US based technology investor
- Completion of placement to happen later this month at $28.50
- Price of $28.50 is a 2.4% discount to five-day VWAP as of Tuesday
- 12 month escrow arrangement
- Funds to be used to fund global expansion
So when shares are issued at a discount, it’s not uncommon to see the share price fall to a comparable level.
Afterpay could be set for further upside as it gains traction in US
Afterpay is now a fintech behemoth and it doesn’t need to be profitable for investors to continue to pile in.
From a value investing perspective, there is little to like about Afterpay.
But from a growth perspective, it is possible that despite today’s loss, Afterpay could go on another run.
With $200 million extra in the bank, the company can now aggressively pursue the lucrative US retail market.
For this reason (and others), we have selected Afterpay as one of our ‘Top 3 Fintechs.’ The other two are involved in fractional ETF investing, and picking up the pieces of the retirement industry in the wake of the Banking Royal Commission. You can download this report here.
For Money Morning