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Square to acquire Afterpay for $29B

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Re: Square to acquire Afterpay for $29B

#71

Post by Scoundreller »

version_five wrote: post #44
treelovinhippie wrote: post #23

Square is buying a loan shark service. "The Australian Securities and Investments Commission found one in five buy now, pay later users is missing payments, half of users aged between 18 to 29 cut back on essential items to make repayments, and more than 1.1 million transactions in 2019 incurred multiple missed payment fees. It also warned 15 per cent of users, and half under 29, had taken out an additional loan to p…

From "Margin Call (2011)" - context is a subprime investment banker explaining how he justifies doing what he does: > People wanna live like this in their cars and big fuckin' houses they can't even pay for, then you're necessary. The only reason that they all get to continue living like kings is cause we got our fingers on the scales in their favor. I take my hand off and then the whole world gets really fuckin' fai…

Don't beat yourself too much about this stuff, all right? Some people like driving the long way home.

Re: Square to acquire Afterpay for $29B

#73

Post by Clewza313 »

babesh wrote: post #64
version_five wrote: post #35

Earlier quoted context omitted.

We're in a gigantic bubble

There have been tens of trillions of dollars and other currencies created from thin air the last year and a half. And more is being created currently. This isn’t just the US government. It’s basically all governments in the world. EDIT: Fed has been purchasing 120b of assets per month https://cheddar.com/media/federal-reserve-to-keep-up-asset-p... Federal government has spent at least 3.5 trillion on COVID-19. EDIT2:…

> So either we are in a bubble or currency has been devalued.

¿Por qué no los dos? Seriously, to me it looks like we were in a bubble even before COVID, and that has now been juiced up by all the newly printed money sloshing around.

Re: Square to acquire Afterpay for $29B

#74

Post by Clewza313 »

shell0x wrote: post #58

As a foreigner in Australia, I can't help but to think that Australians really don't know how to handle finances and are too irresponsible to use a credit card, so Afterpay and Zip stepped in. Maybe it's because I grew up in Europe, but "Don't buy it if you can't afford it" has served me well. The majority of people I know just use credit cards for the perks but never miss a full payment.

Australia has gone 20+ years without a recession, meaning many people have grown up without ever seeing anything except full employment and house prices going up up up. It's thus been a "safe bet" to leverage yourself up to your eyeballs to get on that "property ladder", and while many (including myself) thought this would finally pop last year with COVID, nope, after the briefest hiccup the property market has gone even more nuts this year.

Re: Square to acquire Afterpay for $29B

#75

Post by nsonha »

phist_mcgee wrote: post #54
chrisseaton wrote: post #21

Earlier quoted context omitted.

The long-term effects of a zero-interest loan? What are those?

You sound like a BNPL marketer. The loan has late fees, the app is branded as a easy POS way to buy things with money you don't have. There is no credit check. You can sign up to a dozen of the services at once. It is credit, it has the same negative effects as credit. BNPL is as bad for people as 20% apy credit cards are.

the business model is that BNPL will eat the risk, they won't sent a debt colector after you, they simply won't loan you more money. It's much more humane than credit score which is a form of social credit.

Re: Square to acquire Afterpay for $29B

#76

Post by junon »

geoffpado wrote: post #43
junon wrote: post #9

Earlier quoted context omitted.

I'm completely out of the loop here but plan to integrate Stripe into a new product. Can you elaborate?

Other people have replied to the predatory practices thing, but additionally I'm not sure if it's a misread, typo, etc., but Stripe != Square.

Oh right, seems I've been bitten by this yet again. Thank you.

Re: Square to acquire Afterpay for $29B

#77

Post by babesh »

Clewza313 wrote: post #73
babesh wrote: post #64

Earlier quoted context omitted.

There have been tens of trillions of dollars and other currencies created from thin air the last year and a half. And more is being created currently. This isn’t just the US government. It’s basically all governments in the world. EDIT: Fed has been purchasing 120b of assets per month https://cheddar.com/media/federal-reserve-to-keep-up-asset-p... Federal government has spent at least 3.5 trillion on COVID-19. EDIT2:…

> So either we are in a bubble or currency has been devalued. ¿Por qué no los dos? Seriously, to me it looks like we were in a bubble even before COVID, and that has now been juiced up by all the newly printed money sloshing around.

Yeah, possibly. There are most likely multiple, overlapping things happening at once… some inflationary, some deflationary, etc…

Re: Square to acquire Afterpay for $29B

#78

Post by TuringNYC »

hn_throwaway_99 wrote: post #26

I've just come to accept that I'll never understand corporate finance. Based on the data I could find, this works out to a sales price of about 76 times revenue for Afterpay. Even for a fast growing company, how can they ever grow into that valuation? Of course, it's an all stock deal, so perhaps it's better to just consider what percentage of Square they're giving to Afterpay stockholders, but I still just can't wra…

Other potential reasons for high multiple:

- Acquirer sees huge growth and thus a reasonable PEG ratio

- Acquirer wants some key market they have been unable to win themselves

- Acquirer wants some key technology, patent, or engineering know-how

- Acquirer wants team that has achieved something impressive to apply to acquiring company's own product

- Acquirer wants to absorb client base with higher growth than they have internally

- Acquirer has M&A execs who cant get promoted without deals

- Acquirer has inflated stock, so the cost is only relative to this inflated stock while the stock remains inflated

Re: Square to acquire Afterpay for $29B

#79

Post by notatoad »

moneywoes wrote: post #62

Why couldn't they roll out their own competitior? Wouldn't that be a lot cheaper? I guess much more difficult to expand in the Aus market?

definitely cheaper to build the tech, but possibly more expensive by the time they've convinced all the stores include a "pay later with square" button. as always with these things, they're buying the market not the product.

Re: Square to acquire Afterpay for $29B

#80

Post by kevindong »

hn_throwaway_99 wrote: post #26

I've just come to accept that I'll never understand corporate finance. Based on the data I could find, this works out to a sales price of about 76 times revenue for Afterpay. Even for a fast growing company, how can they ever grow into that valuation? Of course, it's an all stock deal, so perhaps it's better to just consider what percentage of Square they're giving to Afterpay stockholders, but I still just can't wra…

The acquisition is entirely in stock, so very little actual cash is changing hands.

According to the Afterpay investor relations site, Afterpay's gross revenue for FY21 (ended June 30, 2021), assuming constant currency exchanges rates, was $978 million AUD [0]. If you subtract out the first half of FY21's revenue ($385.2 million AUD) [1], we arrive at an implied revenue of $592.8 million AUD for the second half of FY21. Convert that to USD (USD$1 = AUD$1.36) and we arrive at an annualized revenue run rate of ~$871 million USD.

Which implies an acquisition price of ~33.3x gross revenue. Which is certainly a lot better than 76x ratio. Moreover, that growth rate is ~53.9% ($592.8 million / $385.2 million) over the prior half-year which is truly astounding growth.

[0]: On https://corporate.afterpay.com/investors/asx-announcements, go to 'ASX Announcements', then find the 'FY21 trading update' dated 2 Aug 2021, $978 million is on the second data column of the second table on the first page.

[1]: On https://corporate.afterpay.com/investors/asx-announcements, go to 'ASX Announcements', then find the 'H1 FY21 Results Announcement' dated 25 Feb 2021, $385.2 million is on the fourth data row of the first page's table.

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