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Why the Afterpay (ASX:APT) share price is sinking 14% today

A businessman holds his glasses in concern, indicating uncertainly in the ASX share price
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The Afterpay Ltd (ASX: APT) share price has returned from its trading halt on Friday.

At the time of writing, the payments company’s shares are down 14% to $116.00.

Why was the Afterpay share price in a trading halt?

Following the release of its half year results yesterday, Afterpay requested a trading halt so it could undertake a capital raising.

This morning the company announced the completion of the capital raising and revealed that strong demand led to management upsizing it.

According to the release, the company has raised $1.5 billion via an unsecured zero coupon convertible notes offering. This compares to its original target of $1.25 billion.

These notes are due 2026 and are convertible into fully paid ordinary Afterpay shares with an initial conversion price of $194.82. This represents a 45% premium to the Afterpay share price prior to the trading halt.

The company intends to use the proceeds of the convertible notes offering to increase its stake in the Afterpay US business and provide additional capital to continue to accelerate underlying sales growth.

Following completion of the offering, the company’s underlying interest in Afterpay US will increase from 80% to up to approximately 93%. Management notes that the acquisition price is accretive to Afterpay shareholders across gross merchant value, revenue, and customer multiples.

Management sells shares

In addition to the above, the company announced that its Co-CEOs and Executive Directors, Anthony Eisen and Nicholas Molnar, have each sold 450,000 shares.

This sale was undertaken at $134.36 per share, which represents a total consideration of approximately $60 million each.

Furthermore, the two Co-CEOs announced plans to establish Private Ancillary Funds (PAF) for charitable purposes.

While they are both still in the early stages of setting up their respective Funds, each Co-CEO intends to transfer approximately 950,000 Afterpay shares into their respective PAF from their personal shareholdings in the near future. They will, however, retain voting rights over these shares.

Why is the Afterpay share price down 14%?

As well as coming under pressure from the capital raising, the Afterpay share price has been hit hard by a selloff on Wall Street overnight.

The selling has been strongest in the tech sector, leading to the S&P/ASX All Technology Index (ASX: XTX) falling 4% this morning.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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