The Afterpay Ltd (ASX: APT) share price just seems to be the gift that keeps on giving for ASX investors. Not only has this buy now, pay later (BNPL) pioneer shot up by more than 72% over the past 12 months, it has also managed to give investors a sizable 5.6% return over just the past month or so (since 5 August).
So what has gone so right for Aferpay investors over the past month?
Well, as anyone with even a remote interest in Afterpay would know by now, Afterpay is currently in the process of being acquired by the US payments giant Square Inc (NYSE: SQ). Last month, Afterpay announced that it would be bought out by Square in an all-scrip deal.
Once this deal reaches its conclusion, Afterpay investors will be receiving 0.375 shares of Square for every Afterpay share held.
Many investors historically struggled to value Afterpay. That’s due to the company’s status of boasting ballooning revenues but no profitability. At least as yet.
Afterpay share price worth whatever Squares
Well, that is no longer of any real concern. That’s because, in the time that Afterpay has left as its own public company, there’s a far easier way of valuing Afterpay shares: whatever 0.375 of a Square share is worth. That’s the price that Afterpay shares will eventually be acquired at. As such, it arguably represents the company’s ‘value’ to investors today.
So let’s check out what the Square share price has done over the past month or so. Since 5 August, Square shares have gone from roughly US$281.80 to the most recent price of US$269.74. That’s a fall of around 4%.
Even so, on today’s exchange rates and the most recent Square share price, this offer of 0.375 Square shares per Afterpay share means that the offer is currently worth an Afterpay share price of approximately $135.95.
Afterpay shares are still a way away from this price. Because of this, it’s possible that investors have moved to ‘close the gap’ over the past month or so. This would have the effect of pushing the Afterpay share price closer to the value of what 0.375 of a Square share is currently worth.
At Afterpay’s closing share price of $132.88, the company has a market capitalisation of $38.55 billion.