The COVID-19 pandemic leaves many bad memories for investors but it proved to be a catalyst for the mega-merger between the Afterpay Ltd (ASX: APT) share price and Square Inc (NYSE: SQ).
It turns out that Afterpay has been on the radar of Square for at least four years, reported the SMH.
The article said that Square's former country manager for Australia, Ben Pfisterer, helped make the initial introduction.
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Square eyeing Afterpay for years
This was in 2017 when Afterpay's founder Nick Molnar was in San Francisco. But Pfisterer told the SMH that the timing wasn't quite right back then for Square to contemplate an acquisition.
Square is founded by Jack Dorsey, a controversial tech business identity who started Twitter Inc (NYSE: TWTR).
But when the pandemic struck and bolstered the adoption of cashless payments, that changed everything.
Filling in the blanks
Square could see how the Afterpay platform can help it fill in a big missing gap in its merchant payment offering and consumer "Cash" app. The latter helps users make peer-to-peer payments and to invest in stocks and cryptocurrencies.
The popularity of the Cash app skyrocketed during COVID while its merchant payment solution tumbled.
Square believes having a fledging buy-now, pay-later (BNPL) offering will help bridge the gap between the two key offerings.
Should you take profit on the Afterpay share price?
From Afterpay's perspective, being part of a bigger organisation with a higher profile will help it stay ahead of large competitors who are nipping at its heels.
But Afterpay shareholders hoping to get some advice on whether to take profit or hang on for the Dorsey dream machine won't find many hints in the SMH article.
Liquidity and valuation questions cloud the merger
Experts appear divided on this question. The ASX will be a secondary listing for the all-scrip merger of the two. Naysayers warn that liquidity could be a problem for Australian investors.
Also, there are questions about whether the Square share price has run ahead of fundamentals. Its shares have surged by over 2000% over the past five years. Even with the Afterpay afterburner, Square may not be able to sustain its sky-high growth rates.
Reasons to hang on for the Afterpay-Square ride
On the flipside, Aussies suddenly have an easy way to join the US tech party. Many ASX investors are reluctant to own US tech shares even though they have outperformed just about every other benchmark over the past several years.
The Afterpay share price gives us one of the easiest ways to partake in the merrymaking without having to worry about currency risks and transaction costs.
And as long as the Reddit army of cashed up and bored millennials continue to be a force to be reckoned with, the Afterpay share price could have more upside as it joins Square.
