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Affirm Public S-1 Filing

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Re: Affirm Public S-1 Filing

#21

Post by 112012123 »

Interesting. Overall, I agree with everyone else - Affirm looks like a healthy company.

Major takeaways:

1.5% write-off rate for their jan 2020 vintage is very healthy - comparable to the long-term trend for unsecured superprime consumer debt. Given the (I suspect) lower average creditworthiness of Affirm customers, this is a great number. I'd be curious to see their long-term trend for same-age vintages, however. In consumer credit it's well known that all the stimulus support in 2020 has significantly depressed defaults. It would be interesting to see if this is a fluke, or if this is actually what their charge-off rate actually looks like in a normal environment/part of a bigger trend.

I'm a little skeptical of their claim to use ML & build a data moat for significantly better underwriting decisions. Consumer credit laws in the US so severely restrict what you can use for credit scoring purposes that better underwriting through data is basically a lost cause, absent some specific customer segment that has special credit situations.

Finally, as others have noted, 30% of revenue just from Peloton is an enormous number.

Re: Affirm Public S-1 Filing

#22

Post by john_moscow »

newguy1234 wrote: post #10
subsubzero wrote: post #4

The floodgates in 2020 have opened with IPOs of alot of these unicorns, Palantir, doordash, airbnb, affirm, jfrog, snowflake, asana. I wonder why the sudden timeframe to go public. My guess is they want to ride the wave of stimulus money that has been going on during the spring/summer and the 2nd round which has yet to happen.

I don't see it as a problem. Innovation is accelerating with new business models and so on. Adoption curve for new technologies could be occurring quicker as well thanks to social media (easier to "spread the word" about new products/services/technologies). I don't see it as a problem because all of these companies have legitimate products/services, legitimate customers and legitimate cash flows. This isn't another d…

From a quick glimpse, the business model of Affirm seems to be about letting people get loans for things they would previously have to save for. In other words:

Before: Alice wants to buy a chair that costs $100 from Bob. Alice saves $10 a month and buys a chair. Bob got $100. Alice can buy a new chair every 10 months. She may also conclude after 10 months, that she doesn't want the chair that badly, and would instead save the $100 for retirement, or pay it into the house mortgage, reducing the amortization by a week.

Now: Alice wants to buy a chair from Bob. She gets a loan, paying $10 over 12 months. Bob gets $100, Affirm gets $20. Alice can now buy a chair every 12 months. Affirm's founder buys a supercar.

Slightly later: Alice's job gets cut due to COVID. She can now only pay $5/month. She gets a $100 stimulus check, but instead of paying off the chair, she buys Affirm stock and remortgages the chair to 24 months. Now Affirm gets $40 in interest and $100 in fed money routed through Alice.

Net effect: Alice's purchasing power has reduced 2.4 times, Affirm's founder buys 50 new yachts and starts a company that lets people get loans to buy food.

Re: Affirm Public S-1 Filing

#23

Post by [deleted] »

112012123 wrote: post #21

Interesting. Overall, I agree with everyone else - Affirm looks like a healthy company. Major takeaways: 1.5% write-off rate for their jan 2020 vintage is very healthy - comparable to the long-term trend for unsecured superprime consumer debt. Given the (I suspect) lower average creditworthiness of Affirm customers, this is a great number. I'd be curious to see their long-term trend for same-age vintages, however. In…

[deleted]

Re: Affirm Public S-1 Filing

#24

Post by adrr »

subsubzero wrote: post #4

The floodgates in 2020 have opened with IPOs of alot of these unicorns, Palantir, doordash, airbnb, affirm, jfrog, snowflake, asana. I wonder why the sudden timeframe to go public. My guess is they want to ride the wave of stimulus money that has been going on during the spring/summer and the 2nd round which has yet to happen.

Historic low interest rate shifted a lot of capital to the stock market. Bonds don’t pay anything.

Re: Affirm Public S-1 Filing

#25

Post by jimjh »

john_moscow wrote: post #22
newguy1234 wrote: post #10

Earlier quoted context omitted.

I don't see it as a problem. Innovation is accelerating with new business models and so on. Adoption curve for new technologies could be occurring quicker as well thanks to social media (easier to "spread the word" about new products/services/technologies). I don't see it as a problem because all of these companies have legitimate products/services, legitimate customers and legitimate cash flows. This isn't another d…

From a quick glimpse, the business model of Affirm seems to be about letting people get loans for things they would previously have to save for. In other words: Before: Alice wants to buy a chair that costs $100 from Bob. Alice saves $10 a month and buys a chair. Bob got $100. Alice can buy a new chair every 10 months. She may also conclude after 10 months, that she doesn't want the chair that badly, and would instea…

Didn't follow the leap to "remortgage". Which service allows remortgaging of consumer goods?

Don't forget that Alice gets to sit in the chair 10 months sooner, and study for their GMAT or CISSP.

Re: Affirm Public S-1 Filing

#26

Post by kenrose »

john_moscow wrote: post #22
newguy1234 wrote: post #10

Earlier quoted context omitted.

I don't see it as a problem. Innovation is accelerating with new business models and so on. Adoption curve for new technologies could be occurring quicker as well thanks to social media (easier to "spread the word" about new products/services/technologies). I don't see it as a problem because all of these companies have legitimate products/services, legitimate customers and legitimate cash flows. This isn't another d…

From a quick glimpse, the business model of Affirm seems to be about letting people get loans for things they would previously have to save for. In other words: Before: Alice wants to buy a chair that costs $100 from Bob. Alice saves $10 a month and buys a chair. Bob got $100. Alice can buy a new chair every 10 months. She may also conclude after 10 months, that she doesn't want the chair that badly, and would instea…

Your description sounds like the definition of financing.

Yes, with financing there’s a trade off. In exchange for paying interest, you have the item that much sooner.

Slightly tongue-in-cheek, but this is missing in your before example:

Alice has to sit on the floor because she doesn’t have a chair. After 10 months of doing this, she has terrible posture and joint pain from sitting on the floor all the time. Despite her pleas, doctors say that her increased purchasing power won’t cure her ailments.

Re: Affirm Public S-1 Filing

#28

Post by momokoko »

112012123 wrote: post #21

Interesting. Overall, I agree with everyone else - Affirm looks like a healthy company. Major takeaways: 1.5% write-off rate for their jan 2020 vintage is very healthy - comparable to the long-term trend for unsecured superprime consumer debt. Given the (I suspect) lower average creditworthiness of Affirm customers, this is a great number. I'd be curious to see their long-term trend for same-age vintages, however. In…

> Consumer credit laws in the US so severely restrict what you can use for credit scoring purposes that better underwriting through data is basically a lost cause, absent some specific customer segment that has special credit situations.

Can I inquire what your background is or where you found that information? Many companies supplement credit scores with additional data to make these types of decisions.

Re: Affirm Public S-1 Filing

#29

Post by formercoder »

wholien wrote: post #11
xoxoy wrote: post #8

Earlier quoted context omitted.

Haven’t read the prospectus but I know they sell loans to investors and they are fairly highly rated from a credit perspective. I’m sure they have some debt on their books too though.

some debt, but that is mostly for experimentation purposes. Most everything goes into different debt facilities or are securitized and sold

No one would buy the debt if they didn’t hold on to any.

Re: Affirm Public S-1 Filing

#30

Post by cosmie »

john_moscow wrote: post #22
newguy1234 wrote: post #10

Earlier quoted context omitted.

I don't see it as a problem. Innovation is accelerating with new business models and so on. Adoption curve for new technologies could be occurring quicker as well thanks to social media (easier to "spread the word" about new products/services/technologies). I don't see it as a problem because all of these companies have legitimate products/services, legitimate customers and legitimate cash flows. This isn't another d…

From a quick glimpse, the business model of Affirm seems to be about letting people get loans for things they would previously have to save for. In other words: Before: Alice wants to buy a chair that costs $100 from Bob. Alice saves $10 a month and buys a chair. Bob got $100. Alice can buy a new chair every 10 months. She may also conclude after 10 months, that she doesn't want the chair that badly, and would instea…

The "before" was applying for a store-branded credit card at the point of sale, which evaluated your credit risk and (potentially) extended you a revolving credit line equal to what the lender deemed was your appropriate borrowing capacity, potentially far in excess of your purchase amount.

Affirm is just a "micro-transaction" take on that very large and lucrative market. They extend a fixed term, one-time line of credit equal to your transaction amount and no more. Want to use Affirm for another transaction? That'll be an entirely independent line of credit for that transaction, subject to its own application/approval process.

There are a lot of somewhat novel aspects to Affirm's approach, but the core premise of Affirm itself one of them. For better or worse, making it easy for consumers to over-extend themselves by dangling a credit line at the point of sale was widespread and lucrative long before Affirm entered the market.

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