The all-scrip deal will see Afterpay shareholders receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay share they hold on the record date.
In light of this, unlike a takeover with a fixed offer price, the value of this takeover approach will ebb and flow with the Square share price.
As a result, Afterpay shareholders will no doubt be keeping a close eye on the performance of the Square share price between now and the closing of the deal.
How has the Square share price performed since announcing the Afterpay deal?
When the deal was announced at the start of August, the Square share price was US$247.26. This implied a transaction price of approximately $126.21 per Afterpay share at the time.
The good news is that the response to the takeover on Wall Street has been positive. This has led to the Square share price gaining 7.5% to US$247.26.
Based on this gain and current exchange rates, this implies a transaction price of approximately $134.76 per Afterpay share. This is broadly in line with where the Afterpay share price was trading at the close of play on Thursday.
Given that the transaction is expected to close during the first quarter of calendar year 2022, there’s still plenty of time for the Square share price to rise further (or fall).
Potential catalysts include Square’s third quarter results in November and Afterpay’s first quarter trading update in October. And if the deal isn’t closed by February, we can add in Square’s full year results and Afterpay’s half year results that are due that month.