Why Dorsey’s Square overpaid fintech Afterpay
Square, the digital payments platform of Twitter co-founder Jack Dorsey, announced the acquisition of Australian fintech Afterpay for $ 29 billion
Twitter founder Jack Dorsey sets out to conquer the digital installment payments market.
Square, Jack Dorsey's US financial and mobile payment services company, announced a $ 29 billion deal to purchase Afterpay, one of the global "buy now, pay later" players.
This is the largest acquisition ever made for both Square and Australia.
The agreement demonstrates the growing interest in financial companies that offer new credit systems designed especially for young people, particularly affected by the crisis caused by Covid-19. Afterpay allows users to pay for the products they purchase in four installments, without interest, immediately receiving the purchased goods. Users pay a premium only if they don't meet the automatic payment deadline.
"Afterpay Square and have a common goal," said Square CEO Dorsey in a note . "We have built our business to make the financial system more equitable, accessible and inclusive, and Afterpay has built a brand of trust that is aligned with these principles."
Shares of Afterpay in Australia rose on the heels of the news and closed up nearly 19% on Monday.
DETAILS OF THE OPERATION
Jack Dorsey's payments firm announced the $ 29 billion all-equity deal on Sunday evening. The operation represents a premium of approximately 30% compared to the value of the Afterpay stock on last Friday.
Once the acquisition is complete, Afterpay shareholders will own approximately 18.5% of Square, the companies said.
The deal is expected to close in the first quarter of 2022.
THE STRATEGY OF JACK DORSEY
Square pointed to consumers who shy away from traditional credit, especially younger shoppers. The San Francisco-based payments firm already offers installment loans, which it said was a "powerful growth tool" for Square's core sales business.
Now Dorsey plans to integrate Afterpay's purchase installment services into its Cash App ecosystem, its own digital payments app.
WHAT AFTERPAY DOES
Founded in 2014 by Australians Nick Molnar and Anthony Eisen, Afterpay has more than 16 million customers and is used by 100 million businesses around the world. Over the past two years Scalapay has rapidly expanded into the United States and Europe, which now account for more than three-quarters of its 16.3 million active customers and a third of the merchants on its platform, notes the Ft .
Afterpay allows customers to pay in four interest-free installments and pay a commission if they miss an automatic payment. From now on, your customers will be able to manage installment payments directly via the Cash App.
The company said its users see the service as a more responsible way to borrow than using a credit card. Merchants pay Afterpay a flat fee, plus a percentage on each order.
AS IF SQUARE PASSES
The Afterpay acquisition is the largest for Square, which yesterday also released its second quarter accounts, which closed with a net profit of $ 204 million, 40 cents per share, after a loss of $ 11.5 million. cents per share, from a year earlier. Adjusted profit was 66 cents per share, up from 18 cents a year earlier and above 31 cents according to experts' estimates. Revenues were $ 4.68 billion, up from $ 1.92 billion a year earlier but below the 5.03 billion expected by experts.
As CNN points out, Square is in acquisition mode this year. In March, it agreed to acquire a majority stake in Jay-Z Tidal's music streaming service for $ 297 million . And in July it acquired the Crew employee platform, though details of the purchase are not available.
THE COMMENT OF THE ANALYSTS
"It's an expensive buy, but the market buys now, pays later is growing very quickly and it makes a lot of sense for Square to have a solid stake," said analyst Neil Saunders, according to the Ft .
NETWORK PAYMENTS ALSO WITH PAYPAL, MASTERCARD AND AMERICAN EXPRESS
Huge popularity, rapid user diffusion and relatively light regulation have led to rapid growth of the 'buy now, pay later' industry.
Affirm is one of the best known companies offering the ability to finance items with smaller monthly payments. PayPal, Klarna, Mastercard, and Fiserv, American Express, Citi, and JP Morgan Chase all offer similar loan products. Apple is also planning to launch installment loans in a partnership with Goldman Sachs, Bloomberg reported last month.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/perche-square-di-dorsey-strapaga-la-fintech-afterpay/ on Mon, 02 Aug 2021 13:47:44 +0000.