Why has the Afterpay (APT) share price edged higher?

Posted: 4 November 2021 1:06 pm

Shares in BNPL market leader Afterpay are up 22% over the past 6 months.

Shares in Australian buy now pay later (BNPL) leader Afterpay (ASX: APT) are among the most traded stocks on the ASX. In early trading on Thursday, the stock was among the major gainers, rising 2.3% to $124.25.

What is boosting sentiment in the Afterpay stock price?

The latest gains can be attributed to positive news of Afterpay’s impending takeover by US financial services and digital payments giant Square (NYSE: SQ).

Overnight, Square shareholders approved issuing shares (including those to be traded on the ASX) to acquire Afterpay, fulfilling one of the major conditions for the US$29 billion (AUD$39 billion) deal announced in August.

That will allow both parties to press forward. Afterpay will hold its first court hearing later on Thursday, and after securing court approval for the deal and it should be able to release its merger scheme booklet on Friday. It will also then be able to convene its own shareholder meeting to approve the takeover.

Afterpay on Thursday confirmed that it expects the transaction to close during the first quarter of calendar year 2022.

Sector boost

Meanwhile, given the slight lift in the Square share price over the last month and the fixed exchange ratio of the deal (0.375 Square Class A shares for 1 Afterpay share), the Australian company’s stock has corrected upwards from its previous close of $121.53.

Part of the gains in Afterpay could also be attributed to improved investor sentiment in the BNPL sector, after smaller rival Zip Co Ltd (ASX: Z1P) on Thursday said it had processed record transaction volumes in October.

Zip posted total transaction value (TTV) of $770 million in October, a 94% increase on the same month last year, meaning TTV of $9 billion on an annualised basis. The highlight is that this increase comes even before the start of the seasonal peak trading period.

Zip also announced it will launch services in Singapore after inking a deal with local player Singtel Dash. Zip Co shares were up 0.8%.

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