Why has the Afterpay (APT) share price been on the slide?

Posted: 6 December 2021 12:18 pm
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Afterpay-shares-06Dec_1800x1000_Finder

Shares in BNPL market leader Afterpay have tumbled 21% over the past month alone with today the company continuing its slide.

Shares in Australian buy now pay later (BNPL) leader Afterpay (ASX: APT) are high on the list of most traded stocks on the ASX on Monday, but its momentum seems to be in the wrong direction.

The stock was down 4.5% to $93.77 in early trading and has now racked up losses of over 21% in the past month alone.

What is weighing on the Afterpay stock price?

The trigger for the latest slide in Afterpay’s stock price is related to its impending takeover by US financial services and digital payments giant Square (NYSE: SQ), soon to be renamed Block.

Afterpay on Thursday announced it would be forced to delay its shareholder meeting to approve its US$29 billion (AUD$39 billion) takeover by Square (first announced in August) because of a delay in receiving the green light from Spain’s central bank, which regulates Afterpay’s European subsidiary Pagantis.

Square shareholders have already approved the deal and the Afterpay shareholder vote was crucial to the 2 companies maintaining their announced schedule of completing the merger in the first quarter of 2022. While both parties maintain they can still close the deal on that timeline, analysts are not so sure.

The meeting was originally scheduled for 6 December, and on Monday Afterpay Chair Elana Rubin immediately adjourned the meeting after opening it.

The company has scheduled the meeting again for 14 December, but might have to delay it further given that the Bank of Spain is only expected to give its approval by the middle of January.

Sector overhang

Afterpay’s shares have largely traded in line with Square’s stock price since both companies announced their blockbuster merger in August, which will be the largest in Australian corporate history.

But this latest potential hurdle has weighed heavily, with Afterpay shares crashing below the $100 level last week for the first time since the deal was announced with the agreed fixed exchange ratio that valued the Australian firm at $124 a share.

It has also led to a downward momentum for the entire BNPL sector, with smaller rivals Zip Co Ltd (ASX: Z1P) and Sezzle (ASX: SZL) sliding more than 5% and 10% respectively on Monday.

It comes at a time of surging near-term marketing costs for the sector companies as they strive to expand their footprint in various geographies and face rising competition from global financial giants including PayPal, tech leader Apple and Australia’s top lender CBA.

Sweden-based BNPL giant Klarna last month said losses quadrupled in the first 9 months of the year to US$344.1 million, on the back of surging credit losses and growing administration expenses.

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