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Why has the Afterpay (APT) share price soared?


Shares in BNPL provider Afterpay have jumped a stunning 25% on Monday.

Shares in Australian buy now pay later (BNPL) giant Afterpay (ASX: APT) were topping both the ASX best performers and most traded lists this morning. At the time of writing, its shares had soared nearly 24% to $119.70.

Why is the Afterpay stock price on fire today?

Afterpay shares hit the heady heights on Monday after the company announced that it had agreed to a US$29 billion (AUD$39 billion) takeover offer from US financial services and digital payments company Square (NYSE: SQ).

The all-share deal, under which Afterpay shareholders will get 0.375 shares of Square’s class A stock for every share they own, would be the largest acquisition in Australian corporate history.

Based on Square's Friday close, the transaction implies a price of $126.21 per Afterpay share, a premium of more than 30% on Afterpay's last close. The Australian company’s shareholders are expected to own about 18.5% of the combined company.

Afterpay’s board has recommended the transaction, with co-founders Anthony Eisen and Nick Molnar to join Square when the deal completes.

Online payments giant

The deal would create an online payments giant that would easily be able to tap into explosive growth in the BNPL sector, which burst into the mainstream last year as more people, especially youngsters, chose to pay in instalments for everyday items during the pandemic.

“Square and Afterpay have a shared purpose. We built our business to make the financial system more fair, accessible, and inclusive,” Square CEO and co-founder Jack Dorsey said.

"By combining with Square, we will further accelerate our growth in the U.S. and globally, offer access to a new category of in-person merchants, and provide a broader platform of new and valuable capabilities and services to our merchants and consumers,” Afterpay co-founders Anthony Eisen and Nick Molnar said.

The combined business will also be able to take on the push by technology giant Apple and payments behemoth PayPal into the BNPL sector.

Meanwhile, Afterpay also announced in a trading update that underlying sales for the 2021 financial year was up 90% to AUD$21 billion.

Considering investing in Afterpay shares?

If you are keen to buy shares in Afterpay you should consider investing through an online share trading platform.

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