AFFIRM IPO (NASDAQ: AFRM)
On January 13th, 2021, Affirm became the first US-based Buy-Now-Pay-Later (BNPL) payment provider to go public on the NASDAQ at a premium of $49-a-share.
At IPO price Affirm is valued at $12.1 billion, or about $15.6 billion on a fully diluted basis. It reached a $23.6 billion valuation after nearly doubling on its first day of trading, closing at $97.24. Since then shares have continued to rise, currently at $117-a-share, making it the largest BNPL provider in the US and second largest globally.
Both Affirm and the BNPL industry has seen rapid growth in the past five years. As of September last year, Affirm said that more than 6.2 million consumers have completed 17.3 million transactions with over 6,500 merchants on their platform. Leading to a total gross merchandise volume, net of refunds, of approximately $10.7 billion transacted through its platform since July 2016. Its revenue almost doubled to $509.5 million in 2020 from $264.4 million in the previous year.
They are unique in their larger than average order size, provision of interest-bearing loans and use of algorithms to approve greater loans with lower default rates. As they grow their services they hope to expand their zero-interest rate offerings and small short term loans for consumer goods, however questions remain if the industry can continue to maintain minimal credit losses without imposing late fees and interest on delayed payments. Their 2020 revenue growth of 92.7% YoY surpassed all analyst estimates.
Highly attractive to credit-averse millennials and Gen-Z consumers as they can now purchase previously unavailable big-ticket items with zero-interest loans spread over multiple instalments, the next step will be for Affirm to diversify its merchant partners (in Q3 2020 their partnership with Peloton accounted for 30% of their total revenue). Their prospectus counts more than 6,500 merchant partners, including Dyson, Gucci, and Expedia.
Founded in 2017 by PayPal co-founder Max Levchin, Affirm’s backers include Shopify Inc, Singapore’s GIC Pte, Khosla Ventures, Founders Fund and Lightspeed Venture Partners. Their final pre-IPO Series G fundraising round raised a $500 million in September.
Goldman Sachs Group Inc., Morgan Stanley, and Allen & Co. led the offering. It is trading on the NASDAQ under ticker AFRM.
Below table compares the stock performance across notable BNPL providers globally:
