Founders Sell Down As Afterpay Raises $800m

Buy now, pay later group Afterpay will raise $800 million in fresh capital as part of a strategy to speed up its global expansion, while co-founders Anthony Eisen and Nicholas Molnar will sell $250 million in shares as an add-on to the raising.

The moves came as Afterpay released a potted update of the 2019-29 year’s financials to help investors make up their minds about the raising.

The company is looking for $650 million from major investors in an accelerated raising, with a further $150 million from its retail base (at a $20,000 maximum).

Shares will be offered at $61.75 apiece, a 9.2% discount to Afterpay’s $68 closing price on Monday.

The shares have risen sharply in the past month, up 34%, which has boosted the price to a point where it can maximise its capital raising without too much dilution of existing holders, and the two co-founders can take out a quarter of a billion dollars between them and still be left holding over $1 billion worth of shares each.

Eisen and Molnar will each sell off 2.05 million shares alongside the placement, representing 10% of their respective stakes in the company. This is the second time in just over 12 months the two founders have sold shares in the company, with the duo selling around $100 million in shares last June.

Following the current sale, they remain Afterpay’s largest shareholders and have promised to not sell more shares until after this year’s AGM, which is not that reassuring.

Afterpay said yesterday it will be using the proceeds from the raise to capitalise on the significant growth brought about by the coronavirus pandemic, with a focus on short-term international growth, including expansion into new markets such as Canada, which is due to happen by the end of the year.

Eisen, who is Afterpay’s CEO, said the new capital would also help bolster the company’s balance sheet in the face of a global pandemic.

“Given the ongoing impacts from COVID-19 and the uncertain global economic conditions, we have continued to focus on preserving capital and maintaining a strong balance sheet,” he said in the statement to the ASX.

“Our ongoing investment in growing our retailer and customer bases, and global expansion objectives, will ensure we continue to deliver long term benefits to our shareholders. By raising capital today, we believe we will be in the strongest position possible to execute on our strategic initiatives and growth aspirations.”

In the financial update, Afterpay said it saw record sales across the fourth quarter of the financial year, with underlying sales jumping 127% to $3.8 billion. Afterpay’s full-year sales have now doubled on the prior financial year, up 112% to $11.1 billion (those are the value of transactions conducted through its buy now, sell later process).

Afterpay said 2019-20 earnings are expected to be in the range of $20 to $25 million, with Afterpay now having 9.9 million active customers and a net margin of 2%.

But net transaction losses are expected to increase 0.5% for the full year.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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