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The Afterpay Touchcorp share price is going nuts

There’s no stopping shares in the newly-merged Afterpay Touch Group (ASX: APT) that have climbed around 18% since hitting the ASX boards last week.

For now the shares are trading on a deferred settlement basis until July 10 when they should trade by normal settlement as the market assigns the combined group a value greater than $500 million.

Afterpay’s meteoric rise has been based on its ability to sign up retailers as clients at rapid rates as it offers retailers the ability to let their customers buy now and pay later, with Afterpay largely carrying the credit risk.

Although Afterpay’s spectacular rise has made the headlines, it’s the Touchcorp business that is more established with a track record of net profit growth. The merger came about in part because Tocuhcorp as a transaction processor already held a substantial equity stake in Touchcorp and provides the technology that lets Afterpay process its transactions.

In fact it looks like that the two groups combined offer investors an exciting prospect, with the sales focused Afterpay model now married to the profitable Touchcorp as a rich suitor meets a popular bride.

As always investors should remember no businsess is a buy at any valuation, but the combined group looks one for the watch list as both companies have some excellent qualities and put together could perform well long into the future.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.