Square to Buy ‘Pay Later’ Company Afterpay for $29 Billion

(Bloomberg) — Square Inc. said it agreed to buy Australia’s Afterpay Ltd. in an all-stock transaction for $29 billion (A$39 billion) to expand into consumer lending. The deal is the San Francisco-based company’s largest acquisition.

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Afterpay lets consumers purchase items on credit and pay later with a series of installments. The Australian company had a market value of about A$27.9 billion at Friday’s close. The purchase is expected to be completed in the first quarter of 2022, the companies said in a statement.

Square recently launched its banking operations, including checking and savings accounts for small businesses, and offers loans. The addition of Afterpay gives the digital payments company a chance to expand into consumer lending, which it doesn’t currently offer.

Afterpay was founded in 2015 in Sydney, and now has more than 700 employees globally, according to its website. The company lets consumers make purchases on credit, and then pay back the loan over four payments. There are no fees or interest on the loan assuming people pay on time, according to the website.

“Square and Afterpay have a shared purpose,” Square Chief Executive Officer Jack Dorsey said in the statement. “We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles.”

The companies said Square plans to integrate Afterpay into its existing Seller and Cash App business units. This will give merchants the ability to offer a “buy now, pay later” option at checkout, let Afterpay consumers manage their installment payments directly in the Cash App, and allow Cash App customers to discover merchants and installment offers directly within the app, the companies said.

Square also reported second-quarter gross profit of $1.14 billion, up 91% year-over-year. Gross payment volume, or the total amount of payments processed on Square’s platform, increased 88% to $42.8 billion, the company said in a statement. Analysts, on average, projected $36.8 billion, according to data compiled by Bloomberg. Square had been scheduled to release earnings Thursday.

Total revenue, including Bitcoin, was $4.68 billion. Bitcoin revenue alone was $2.72 billion, below the $3.4 billion estimate by analysts. Square said Bitcoin revenue declined because of “relative stability in the price of Bitcoin, which affected trading activity compared to prior quarters.”

(Updates with earnings beginning in the seventh paragraph.)

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