CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

Implications of Afterpay’s $800 million capital raise

We examine the highlights and some of the key implications from the company’s just announced capital raise and trading update.

Implications of Afterpay’s $800 million capital raise

Buy now pay later (BNPL) darling Afterpay (APT) today announced plans to raise $800 million – made up of a $650 million fully-underwritten institutional placement and a non-underwritten $150 million share purchase plan.

As part of the institutional portion of the raise, the company expects to issue as many as 10.52 million new shares – at a floor price of $61.75 per share, representing a moderate discount to Afterpay’s last traded price.

In a statement to the ASX, the company said it would use the funds from the raise to drive underlying merchant sales growth, expedite global expansion opportunities, enhance long-term shareholder value and strengthen the firm’s balance sheet. Further afield, Afterpay also said it was exploring a variety of M&A opportunities to ‘accelerate [its] roll-out across potential new international markets.’

Commenting on the impact of the raise, UBS analysts this morning said:

‘Today's raising will de-risk APT's operating model without being significantly EPS dilutive, though it also supports our view on capital intensity. We highlight that APT's shares have rallied +41% since 1 June and did not trade above the $61.75 floor price until 1 week ago.’

Concurrently, Afterpay’s co-founders – Anthony Eisen and Nicholas Molnar – revealed they would be selling ~10% of their APT holdings, in a fully-underwritten sell-down, valued at an estimated $250 million.

Citigroup and Goldman Sachs are the joint lead managers of the raise.

Afterpay share price: trading update in focus

As part of today’s raise announcement, Afterpay (APT) also provided the market with details of its Q4 and expected full-year, FY20 performance. Overall, it proved to be another year of stellar growth for the company, with Afterpay reporting FY20 full-year underlying sales (GMV) of $11.1 billion, up 112%; and Q4 underlying sales of $3.8 billion, up 127%.

Yet it was underlying sales growth in the US – arguably Afterpay’s most important market – that was especially impressive, hitting $4.0 billion in FY20, implying a staggering year-over-year growth rate of 330%.

The company said this was 'driven by the introduction of new global enterprise retailers to the platform and an acceleration of e-commerce spending.’

On the earnings side of things, APT expects to report full-year earnings (EBITDA) of between $20-25 million, suggesting that the stock is trading on an incredibly rich multiple at current price levels – even for a fast growing tech company.

Indeed, although Afterpay’s stock is currently in a trading halt, at its last traded price of $68.00 per share – the BNPL company had an implied market capitalisation of $18.23 billion, making it larger than the likes of Aristocrat Leisure, Brambles, Scentre Group and Suncorp.

Elsewhere, active merchant numbers rose 72% to 55.4 thousand, while active customers more than doubled, reaching 9.9 million.

Finally, though Afterpay positions itself as a tech disruptor, the company nonetheless noted that in fiscal 2020 it expects full-year net transaction losses to have increased 55 basis points, though net transaction margins are reportedly expected to stay stable at ~2%. This figure, according to the company underpins 'a pathway to longer term profitability for the overall business.'

Last Thursday Citigroup raised their price target on APT 137% to $64.25 per share, though retained their Neutral/ High Risk rating on the stock.

Want to trade Afterpay: long or short?

Create an IG trading account or log in to your existing account to get started now.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

See more forex live prices


See more shares live prices


See more indices live prices

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.