consider investing in a fintech player modernizing the online credit market

The Buy Now and Pay Later (BNPL) concept allows consumers to pay in installments, spreading payments over time. Fintech Affirm Holdings Inc, which provides installment loans to online buyers, debuts on NASDAQ this week, seeking to raise $ 1.08 billion when it goes public.

Affirm IPO continues last year’s record run, including Airbnb and DoorDash, until 2021.

Confirm details of the IPO

The San Francisco-based company listed its shares on the NASDAQ stock exchange on January 13, 2021, under the symbol AFRM. The fintech company intended to offer 24.6 million shares in a range of $ 33 to $ 38 per share. Just a day before the scheduled IPO, Affirm raised its expected price range from $ 41 to $ 44 per share. At the high end of Affirm’s IPO price range, it would net it $ 1.08 billion and a valuation of over $ 11 billion.

Affirm launches the public offering of two classes of shares, which is common practice among start-ups in Silicon Valley. Class A will bring one vote and class B will give 15.

The Initial Affirm Public Offering (AFRM) is led by Goldman Sachs Group Inc, Morgan Stanley and Allen & Co. Max Levchin, the company’s founder and largest shareholder to control nearly 20% of the voting rights after the offer .

Affirm IPO

According to Affirm Holdings’ IPO prospectus, its mission is “to provide honest financial products that improve lives.” In a letter attached to the Affirm IPO filing, Levchin mentioned a lack of innovation in the payments industry over the past few decades: agree there has to be a better way: it’s time to evolve again payments.

He believes that today’s payment providers could help merchants increase sales and increase customer acquisition, and help consumers see clearly what they’re paying for and when.

Affirm the economic model

Affirm Holdings (AFRM) offers online installment loans, which are gaining popularity among clients around the world. In 2020, it announced its partnership with Shopify, allowing merchants to offer installment loans on their products. Currently, Affirm works with 6,500 merchants, including well-known brands such as Peloton, Walmart and Expedia.

Even though the business doesn’t charge interest on its installment loans, it does earn a commission when it helps a merchant make a sale. It also earns interest on some consumer loans, but the rate varies and often starts at 0%, depending on the creditworthiness of the customer.

Affirm Holdings earns money through its “% APR” payout option, which involves taking a share of the end of the transaction from the merchant. It also offers “simple interest” loans, through which it also receives interest from the client.

The buy now-pay-later trend has become very popular in Europe and Australia and is now gaining traction in the US market. According to Worldpay, 20% of consumers use BNPL’s services in Germany and Australia, but this payment method only accounts for 1% of e-commerce payments in the United States, making it a great new market to expand into. .

Affirm IPO

Financial performance: Affirmer turnover and losses

According to its IPO filing, Affirm posted a net loss of $ 15 million on revenue of $ 174 million for the third quarter of 2020, compared to a loss of $ 31 million on revenue of $ 88 million. for the same period in 2019.

For the fiscal year ended June 30, 2020, Affirm reported revenue of approximately $ 510 million, a 93% jump from 2019. The company’s gross merchandise volume, the most common measure largest in the payments industry, grew by 77% per year. during the year. Around 64% of Affrim’s loans in 2020 went to loyal customers.

Affirm Holdings' financial performance

Affirm’s largest dealer, Peloton, the home exercise company, accounts for 30 percent of its total sales. The top 10 Affirm merchants provided 37% of the company’s revenue in the third quarter of 2020, posing a risk to Affirm’s performance if one of these partners is lost.

Affirm Equity Trading

If you are not sure whether it is worth buying Affirm shares and making a long-term investment, you can still profit from its price fluctuations by using contacts for the difference.

The company’s shares become available for CFD trading immediately after the Affirm IPO date. You can speculate on the Affirm market value, without needing to buy the asset itself. By choosing CFDs, you can profit from any movement of the AFRM stock: open a long position if you think the stock will go up, or a short position if you expect the stock to go down.

Take your chance to benefit from the trading actions of the innovative player in the e-commerce payment market. Follow the IPO news on Capital.com and find the best levels to open a profitable CFD trade.

Read more: Airbnb IPOs: read before investing in the stock

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David A. Albanese

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