Afterpay, Square tumble as $39bn deal hits snag

Shares in both companies have dropped by more than 5 per cent after a crucial shareholder vote was postponed.

Jack Dorsey on Thursday announced Square would become Block. Picture: AFP

Shares in Australian buy now, pay later darling Afterpay tumbled below $100 for the first time in nearly six months on Thursday, after it was forced to postpone a shareholder vote to approve a blockbuster $39bn merger with US payments giant Square, which itself announced a major rebrand.

Afterpay on Thursday fell as low as $99.8, before closing down 6.1 per cent to $100.02, making it the second worst performer for the day. It led the whole tech sector down, with Xero falling 5.1 per cent and fintech Netwealth falling by 6.5 per cent.

It’s the first time the company’s shares have dipped below the $100 mark since late July, and it’s trading at well below Square’s agreed takeover price of $124. Afterpay announced on Thursday that a scheme meeting, which had been scheduled for December 6, will be delayed to sometime in the new year due to delays in approval from the Bank of Spain.

The buy now, pay later company said it is still confident the tie-up can go ahead on schedule.

“Afterpay and Square are confident that the Bank of Spain condition will ultimately be satisfied,” CEO Anthony Eisen said in a statement to shareholders.

“Whilst the statutory deadline for Square’s application for Bank of Spain approval is currently February 21 2022, at present Square expects that the Bank of Spain condition will be satisfied in mid-January 2022.”

The company said the merger – the largest in Australian corporate history – is still on track to be completed by the first quarter of 2022 pending shareholder approval.

Analysts at Macquarie said the vote delay was unexpected, but did not reduce the likelihood of the deal ultimately being approved.

Afterpay CEO Anthony Eisen. Picture: Damian Bennett

“Beyond Bank of Spain approval not yet being satisfied, Afterpay have announced successfully meeting regulatory conditions from FIRB, OIO, Spanish FDI and ATO,” analyst Wei Sim said in a research note, maintaining a ‘Outperform’ rating.”.

“Despite a delay in the scheme vote, the fundamental outlook and overall timing of Afterpay’s acquisition remains unchanged in our view.”

US payments giant Square also tumbled by nearly 7 per cent after it announced a name change to Block, a move CEO and co-founder Jack Dorsey said reflected the company’s growth and increasingly diversified business units. Afterpay’s shares have largely risen and fallen in line with Square’s since the companies announced a blockbuster $39bn merger in August, which would be the largest in Australian corporate history.

“We built the Square brand for our Seller business, which is where it belongs,” Mr Dorsey, who stepped down as chief executive of Twitter this week, said on Thursday morning. “Block is a new name, but our purpose of economic empowerment remains the same. No matter how we grow or change, we will continue to build tools to help increase access to the economy.”

The name has many associated meanings for the company — building blocks, neighbourhood blocks and their local businesses, communities coming together at block parties full of music, a blockchain, a section of code, and obstacles to overcome, Mr Dorsey said.

The name change will come into effect December 10.