Square Wants Afterpay in $29 Billion Bet on Installments

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Square saying it will purchase buy-now-pay-later company Afterpay for $29 billion in stock, a 30% premium over where Afterpay recently traded.

It’s the latest example of a large tech player piling into the installments game. Affirm, a company started and helmed by PayPal cofounder Max Levchin, went public in January and has a market value of about $15 billion. That valuation took a hit earlier this month after a report that Apple is considering a push into the space; but in the wee hours this morning Affirm was higher on Square’s move. The logic, perhaps: If Square’s buying Afterpay, some other tech or banking player might want to buy Affirm.

Why is this important?

Buy-now-pay-later fintechs like Affirm and Klarna say they have a better approach to credit than the credit card companies, allowing customers to split their purchases into four installments, often at zero interest and with no late penalties. The fintechs say what empowers them to do it is a smarter approach to data that helps them judge creditworthiness.

Meanwhile the split payment option has been a boon to retailers such as Peloton, which sells a big-ticket item. At the beginning of the year Affirm said Peloton alone made up more than a quarter of its revenue, though the percentage seems to have moderated since.

But the part most worth pondering here is why Square, with a market cap of $113 billion, would pay a quarter of its value for an Australian buy-now-pay-later firm unless it felt it had to. Keep in mind: Square itself was worth little more than $29 billion at the beginning of 2020, before the pandemic hit and accelerated digital commerce and the investor imagination. Whatever the future holds, Square seems to believe there’s great strategic value in forming relationships with larger sellers offering bigger-ticket items, and holding heftier customer balances.

While you were sleeping …

European ride-hailing firm Bolt said Monday that it has raised 600 million euros ($713 million) in fresh funding, as it looks to push into the rapidly-growing online grocery delivery industry. CNBC

Qualtrics on Thursday said it would acquire privately held Clarabridge for $1.1 billion in stock. Qualtrics, which was spun out of SAP SE earlier this year and remains majority-controlled by the German software company, makes software that helps companies gather feedback from customers about their experiences with products and services. Reuters

In the broader world …

The Treasury Department will begin conducting emergency cash-conservation steps on Monday to avoid busting the federal borrowing limit after a two-year suspension of the debt ceiling expired at the end of July. CNBC

On the horizon …

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