1/
If you’ve spent recent days trying to guess the moves of Chinese Govt, you may have missed Australia’s largest-ever deal
US$29bn
No, no one acquired Newcrest, one of the world’s largest gold miners at a 70% premium
Square bought, “Buy now, pay later” company, Afterpay AP
If you’ve spent recent days trying to guess the moves of Chinese Govt, you may have missed Australia’s largest-ever deal
US$29bn
No, no one acquired Newcrest, one of the world’s largest gold miners at a 70% premium
Square bought, “Buy now, pay later” company, Afterpay AP
2/
They must have some unique technology
No, but they do have a great Vision
“Fairness and Financial Freedom for all”
and Visions aren’t cheap
Well I value Fairness & Freedom
But does Square get anything else for $29bn?
They get 4 values:
Keep it real
Do the right thing
They must have some unique technology
No, but they do have a great Vision
“Fairness and Financial Freedom for all”
and Visions aren’t cheap
Well I value Fairness & Freedom
But does Square get anything else for $29bn?
They get 4 values:
Keep it real
Do the right thing
3/
Be brave
Shape the future”
AP advertises:
“No external credit checks, no interest, no fees - when you pay on time, no surprises & our customers love us for it”
Well, no one wants surprises right now, least of all Chinese tech investors - their nerves are shattered
Be brave
Shape the future”
AP advertises:
“No external credit checks, no interest, no fees - when you pay on time, no surprises & our customers love us for it”
Well, no one wants surprises right now, least of all Chinese tech investors - their nerves are shattered
4/
Who are their customers?
73% are Millennials & Gen Z
And how does it work?
“Make the first of 4 payments at the time of purchase & the rest over 6 weeks”
How do they make money?
It looks like they get 3.8% of retailer sales & late fees
Oh, like Blockbuster?
Well,
Who are their customers?
73% are Millennials & Gen Z
And how does it work?
“Make the first of 4 payments at the time of purchase & the rest over 6 weeks”
How do they make money?
It looks like they get 3.8% of retailer sales & late fees
Oh, like Blockbuster?
Well,
5/
did Blockbuster “protect" you like this?
"To protect you, our late fees are capped, for each order below £24, a maximum of one £6 late fee may be applied per order. For each order of £24 or above, the total of the late fees that may be applied are capped at 25% of the
did Blockbuster “protect" you like this?
"To protect you, our late fees are capped, for each order below £24, a maximum of one £6 late fee may be applied per order. For each order of £24 or above, the total of the late fees that may be applied are capped at 25% of the
6/
Original Order Value or £36, whichever is less."
So let's run the numbers
GenZ buys jeans for £24 requiring 4 equal payments
But they pay £6 now so only have £18 outstanding
And if they party too hard & miss the 1st payment, they get a £6 late fee
Equal to 33% of
Original Order Value or £36, whichever is less."
So let's run the numbers
GenZ buys jeans for £24 requiring 4 equal payments
But they pay £6 now so only have £18 outstanding
And if they party too hard & miss the 1st payment, they get a £6 late fee
Equal to 33% of
7/
their outstanding balance a week or so later
33%, didn’t they say 25%?
Yes, but that's of the order value not outstanding
Oh, I thought they said, “no surprises”
And with interest rates so low, how is 33% over 2 weeks
“Keeping it real”... Dude?
their outstanding balance a week or so later
33%, didn’t they say 25%?
Yes, but that's of the order value not outstanding
Oh, I thought they said, “no surprises”
And with interest rates so low, how is 33% over 2 weeks
“Keeping it real”... Dude?
8/
Their marketing guide for retailers is helpful because it suggests retailers don’t advertise:
“no fees”
but rather
“no fees when you pay on time”
and don’t say
“no-cost”
rather
“interest-free”
And they provide a disclaimer for the retailers to use - how kind
Their marketing guide for retailers is helpful because it suggests retailers don’t advertise:
“no fees”
but rather
“no fees when you pay on time”
and don’t say
“no-cost”
rather
“interest-free”
And they provide a disclaimer for the retailers to use - how kind
9/
"If you fail to pay on time, your Clearpay debt may be passed to a debt collection agency & this may affect your ability to use Clearpay in future."
Oh, so this is basically a payday loans business for GenZs & Millenials
Does the debt collection agency "do the right thing?"
"If you fail to pay on time, your Clearpay debt may be passed to a debt collection agency & this may affect your ability to use Clearpay in future."
Oh, so this is basically a payday loans business for GenZs & Millenials
Does the debt collection agency "do the right thing?"
10/
The Afterpay annual report shows that the top 10% of customers use it 31x p/a across 6 verticals & 14 merchants
And late fees only apply “per order”…
But "shaping the future" aside
Is this a good investment for Square?
Well, Afterpay lost $79m in H1
The Afterpay annual report shows that the top 10% of customers use it 31x p/a across 6 verticals & 14 merchants
And late fees only apply “per order”…
But "shaping the future" aside
Is this a good investment for Square?
Well, Afterpay lost $79m in H1
11/
But generated A$5m ($3.7m) in operating cash flow - adjusted of course
so $29bn for $3.7m of H1 cash flow
and 21x book value
You can buy a profitable European Bank for a fraction
The only people who need to "Be brave" and "Keeping it Real" are Square shareholders
But generated A$5m ($3.7m) in operating cash flow - adjusted of course
so $29bn for $3.7m of H1 cash flow
and 21x book value
You can buy a profitable European Bank for a fraction
The only people who need to "Be brave" and "Keeping it Real" are Square shareholders
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