Afterpay has its eyes set on the USA. The Revolutionary Buy-Now Pay-later (BNPL) company Afterpay is considering listing on the US stock market. In what is quite possibly the biggest announcement we have ever heard from the company.

Moving to the US will significantly improve APTs access to capital and help facilitate the massive expansion of the BNPL giant onto global scales we have never seen. The US market offers a massive liquidity advantage that Australia just cannot compete with. The Australian share market is valued at US $1.8 Trillion dollars, compared to a massive $63.07 Trillion in the US, a breathtaking 35 times more. With 35x greater capital and the biggest tech companies in the world, the US market is honestly perfect to boost the growth story of APT.

This news comes after the Q3 FY21 Business Update released yesterday. With APT realising sales growth of 123% over the quarter. And a massive 2211% jump on US sales.

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“Based on Q3 FY21 performance, North America is now the largest contributor to underlying sales and outperformed the seasonally strong Q2 FY21 on a local currency basis”.

This quote from the Business update is arguably the key reason for APT’s switch to the US market. The US in fact became the first region for the company to record $1 Billion dollars in sales in a single month. with the company stating “Afterpay is currently working with external advisers to explore the options for a US listing given the US market is now the strongest contributor to our business and is expected to continue to grow strongly, while Afterpay intends to remain an Australian headquartered company our shareholder base is increasingly becoming more globally focused, a US listing would further accommodate this growing interest”.

Afterpay is the biggest BNPL by market share in Australia at a massive 70%, with ZIP as second biggest player. Both have been an extraordinary growth stock story and Z1P is also considering a move to the US market. Today a ZIP spokesman said, “ZIP is always interested in exploring better opportunities that deliver better outcomes for the business and its shareholders” For these growth stock tech companies the tech-heavy NASDAQ is the perfect place for these disruptive tech stocks with massive price-to-earnings ratios. With Z1Ps US base set to surpass that of Australia later this year, their move is most likely imminent as well.

Check out our latest article on Z1P here: https://prophet-invest.com/zippay-z1p-asx-raising-capital-maybe-crypto-peer-peer-lending-is-looming Is Z1P going into Cryptocurrency, Bitcoin, Doge?

So, what does this mean for investors?

While the structure of the move is still in the works APT is “always interested in exploring opportunities that deliver better outcomes for the business and its shareholders”.  it is difficult to know how exactly this will look. However, the company is keen to ensure Aussie shareholders can easily maintain retail exposure in the growth story. The company appointed Goldman Sachs to forego the potential listing. There are two likely forms this will take for investors. One would be the complete move of the equities of Afterpay Limited to the US and delisted from the ASX, and a new security being relisted via a CDI (CHESS depositary Interest).  A CDI is a financial product traded on the ASX allowing non-Australian companies to be easily brought and sold like any other domestic company.

The second option is APT remaining listed on the ASX while being dual listed in the USA via an ADR (American Depositary Receipt), pretty much their version of an CDI.

Both options are easily acceptable to Aussie investors and no large disruption will occur to current shareholders.

What does this mean for the Share Price?

It’s hard to imagine how the share price will respond to the switch to the US stock Exchange. But simply put its hard to see how being listed in the US would be detrimental to the share price. On the contrary this opens up a new range of possibilities. Although many of the large institutional investors are already owners of APT, there is a mass of retail investors like you and me that the company will become more accessible to. A hyped IPO could really see this stock ‘advertised’ to all these investors and snapped up quickly.

Although APT is killing the BNPL space in Australia, globally the biggest players are US based companies PayPal, Klarna and Affirm. PayPal is a household name which is broadly diversified from the BNPL space, so it is hard to compare to APT, Klarna is not publicly traded so it’s best to compare Affirm and Afterpay. Here’s how their financials compare;

APTAffirm (USD)
Cash606M267M
Total Assets1.6B1.4B
Total Liabilities662M965.1M
Total Net Assets946M435M (67M accounting preferred shares)
Revenue375M509M
Revenue increase YOY109%92.8%
Total Expenses480M617M
Net Loss79M112M
Market Cap36.2B16.7B

Comparing these financials its surprising how similar these companies are. Keeping in mind Affirm is given as USD, and APT is AUD. APT is trading at a premium to Affirm in market cap. Thus, its unlikely that the US market would price APT up significantly.

One last thing to consider is the history of Australian companies listing in the US. I have taken the liberty to assess the history of everyone. Since listing these companies have averaged 6.5%pa. But we will have to wait to see how APT really performs.

Prophets Take

We have been bullish on APT and Continue to be. A move to the US is not going to send the share price to the moon overnight but it will make the company more accessible to US retail investors and that makes us excited.

Please Remember all Articles Published on Prophet Invest are Opinion only

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