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Afterpay closes oversubscribed share purchase plan, stock hits $34.8

Afterpay has today revealed the details behind its oversubscribed share purchase plan (SPP) – which officially closed last Friday, January 17.

Afterpay share price in focus Source: Bloomberg

Afterpay share price runs higher

Momentum continues to build for Afterpay (ASX: APT) – with the company’s share price today rising as much as ~2% during the morning session.

The blue-chip index also exhibited equally bullish price action today – with the ASX 200 rising as much as 1.08% – hitting the 7,142 point mark – towards the close of the session.

Share purchase plan details

All of this comes as Afterpay today announced that the company had officially closed its now scaled-back share purchase plan (SPP) last Friday, January 17.

This SPP was first revealed in June 2019 and subsequently offered to eligible shareholders in December 2019.

Looking at the specifics of this plan, it was noted that:

'Afterpay offered eligible shareholders in Australia and New Zealand the opportunity to subscribe for up to $15,000 worth of new, fully paid, ordinary shares in Afterpay, without incurring brokerage or other transaction costs.'

Under the terms of the share purchase plan, the SPP share price was determined to be $23.00 per share.

Yet as we alluded to above, due to significant investor demand, the share purchase plan had to be substantially scaled back.

‘As the value of applications, approximately $240 million, significantly exceeded the cap of $30 million for the SPP, the Afterpay Board has decided to exercise its discretion under the SPP terms to scale back application to a total of approximately $33 million.’

This scale back will be done on a pro rata basis.

To scale or not to scale

Though Afterpay’s Board considered upsizing the SPP due to demand, it was ultimately pointed out that:

'In order to preserve the original record date of 7 June 2019 and the capped issue price of $23.00 per share for the SPP, the terms of the SPP (including the maximum size of the offer) had to remain materially unchanged.'

Not scaling up the SPP – posited Afterpay’s Board – is the in the best interest of all shareholders.

As a result of the now finalised SPP, roughly 1.4 million Afterpay shares will be issued. This will add to the already 260.66 million APT shares currently on issue.

These shares are set to be allotted on Wednesday January 29.

Today’s news caps-off a strong period of growth for the fast-growing BNPL company, with Afterpay’s share price already up ~18% since December 31. Over the last year the APT share price has more than doubled.

Even with that share price run-up, Afterpay (ASX: APT) remains overwhelmingly liked by analysts: with an overweight rating on average, according to the Wall Street Journal. Nine out of the 12 analysts covering APT rate it a ‘Buy’, also according to the Wall Street Journal.

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