Afterpay raising $800m as co-founders sell down

Afterpay co-founders Anthony Eisen, left, and Nick Molnar.

Afterpay will raise $800m while its co-founders offload $250m in shares to investors, as it looks to fund its expansion into Canada.

The buy now, pay later service provider will raise $650m through a placement and $150m through a share purchase plan.

Founders Anthony Eisen and Nick Molnar are also selling shares worth $250m.

Afterpay launched a book build for the raise, with the floor price for shares being sold at $61.75, a 9.2 per cent discount to their last close of $68, and the top of the range $66, with bids received in 25c increments.

It said later it had received strong support for the equity raising, with the book covered at $62.50 per share.

Afterpay shares were in a trading halt.

Working on the underwritten raise is Goldman Sachs and Citi.

The move comes as Afterpay shares on Monday closed at a record high of $68.00 each.

This is a 440 per cent rise from the depths of the coronavirus selldown in March, when shares traded at just $12.44.

Much of the surge in Afterpay has been since the start of May, when it emerged that Chinese tech giant Tencent acquired a 5 per cent stake in the Australian buy now pay later company.

The move will see Afterpay push into China’s $US2 trillion ($3.1 trillion) e-commerce market on the back of a partnership with Tencent.

In a trading update with the raising Afterpay said it had experienced strong performance across the business with underlying sales of $11.1bn in the year to end-June, which is up 112 per cent on the previous year.

The payments operator said its June quarter sales performance “represented the highest quarterly performance ever, reflecting the accelerating shift to e-commerce spending since the impacts of COVID-19 emerged globally”.

Afterpay expects to deliver pre-tax earnings excluding significant items for financial year 2020 to be between $20-25m.

Active customers of 9.9m for financial year 2020 is 116 per cent above 2019, reflecting “the flight to online spending and the attractiveness of our budget-focused business model in the current environment,” the company said.

Afterpay said the coming year is expected to be a year of increased investment as it “maintains the strong momentum in the business and capitalises the opportunity to scale globally”.

Afterpay chief executive Anthony Eisen said the latest results are a product of a “differentiated business model and our loyal customer and retailer base”.

“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,” Mr Eisen said.

“The flexibility in our business model allowed us to manage risk when we needed to, but also take advantage of positive customer sentiment and behaviours. 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.

The capital raising will put the company “in the strongest position possible” to push ahead with strategic initiatives and growth aspirations.

Pricing for the institutional component of the raising will be determined via an institutional bookbuild, with an underwritten floor price of $61.75 per new share. The underwritten floor price represents a 9.2 per cent discount to the closing price on Monday.

Concurrent with the placement, Afterpay co-founders, Anthony Eisen and Nicholas Molnar have each agreed to sell 2.05m shares, representing 10 per cent of their respective holdings in Afterpay.

Both Mr Eisen and Mr Molnar are each expected to remain Afterpay’s largest shareholders with a relevant interest in approximately 18.4m shares each.

In a statement, Afterpay said Mr Eisen and Mr Molnar remain committed to Afterpay and have each confirmed that they will not sell any further shares until after the company’s 2020 AGM.