Overview: Afterpay Holdings Limited (“Afterpay”, “the Company”) is an Australian microfinance company focused on payment solutions. Afterpay offers a service and software infrastructure that allows retail merchant clients to offer ‘buy now, pay later’ programs to end- customers. Afterpay generates revenue via merchant and transaction fees and as of the date of the prospectus had 100 retail clients and 38,000 registered end-customers. The company was founded in 2015.
Catalysts: Since its inception in 2015, Afterpay has witnessed interest for its services, and increased monthly revenue 10-fold while securing more than 100 retail merchant clients and 38k end-customers. In order to sustain the trend, Afterpay will use the proceeds to increase funding and working capital. Progression from product validation to scalable sales growth is expected to be the main share price driver.
Hurdles: Afterpay is reliant on external capital to fund its daily operations and with a limited operating history there is no guarantee that planned growth initiatives will yield a return on shareholder funds. Afterpay operates in a highly competitive environment and may be subject to increasing competition. A significant degree of the unallocated free float may impair early trade in its shares.
Investment View: Afterpay offers speculative exposure to the microfinance industry. Early growth momentum and existing client network are attractive qualities. However, the company was founded in mid-2015 and has a limited operating history, whilst being reliant on external capital. Demand for its product is an initial validation signal, however, IPO participants are required to have a high-risk appetite for this start-up.