This Afterpay-backed company is listing on ASX next week

Everyone loves to talk about their Afterpay shares. But now that journey's over, how about this spin-off?

| More on:
a woman peers over a surface with a happy, curious look on her face with eyes wide as though she is overhearing something.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The favourite barbecue story for ASX investors the last couple of years has been Afterpay Ltd (ASX: APT).

The buy now, pay later provider has been the darling of the local bourse, going from an initial public offer price of $1 per share to $125.67 on Monday afternoon.

In other words, $10,000 invested when it floated in 2016 would now be a tidy $1.26 million.

But now that big US fintech Square Inc (NYSE: SQ) is buying it up for $39 billion, perhaps that explosive chapter of the company's life will come to a close.

However, did you know there is a business that will list on the ASX next week that was spun out of Afterpay?

In fact, Afterpay still holds a 32% stake.

Touch Ventures about to land on the ASX

Shares for a company named Touch Ventures Limited (ASX: TVL) will start general trade on the ASX on 29 September.

The venture capital provider launched in 2019 as AP Ventures as a way for Afterpay to invest in startups.

Cyan portfolio manager Dean Fergie told his clients in a memo that the Afterpay connection couldn't hurt.

"Given the huge investor support of Afterpay — additionally so, after its deal with Square that sent Afterpay's shares 30% higher — another good debut on listing could be expected."

Fergie's fund already has some shares after buying in during a pre-IPO funding round.

What does Touch Ventures do?

Touch Ventures invests in startups, primarily by buying some equity in them.

The firm currently has 5 businesses in its portfolio but is aiming to increase that to 8 to 10 companies after the ASX listing.

Normally only sophisticated and institutional investors have access to startup equity as they're far higher risk than publicly listed stocks.

So the float of Touch Ventures would be a rare way for mum-and-dad investors to get a look into the exciting high-growth startup world.

Perhaps as a sign of its pedigree, Fergie said Touch has 2 buy now, pay later startups on its books: Postpay, which operates in the UAE, and Happay, which is a Chinese fintech. 

"Most significantly, Touch Ventures Limited invested US$25m into Australia Post competitor Sendle which has made significant inroads in Australia and is looking to expand into the US." 

The portfolio also includes PlayTravel which is arguably another buy now, pay later system. That business allows customers to pay for travel packages in instalments.

The 5th startup in the portfolio is Basiq, a financial data mining platform.

Touch Ventures chair Michael Jefferies said in the prospectus that no geographic zones or sectors are off-limits in the investment strategy.

"Touch Ventures has a preference for global ventures. All companies in the foundation portfolio are generating revenues but are not profitable at this stage."

The prospectus also mentions that Afterpay could refer investment opportunities onto Touch Ventures.

"Afterpay may also provide specific expertise along with Touch Ventures' expertise in assessing opportunities referred to Touch Ventures and may separately enter into commercial agreements with companies that Touch Ventures decides to invest in," said Jefferies.

The IPO, which issued shares at 40 cents apiece to raise $100 million, has now closed. Touch Ventures shares will start normal trading on the ASX on the morning of 29 September.

Afterpay will then hold 23.3% of the total fully diluted stock.

Motley Fool contributor Tony Yoo owns shares of Square. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO and Square. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on IPOs

Man with rocket wings which have flames coming out of them.

The newest ASX IPO stock just rocketed 50%

This IPO has certainly been a success on day one.

Read more »

IPO written in circles with a man holding a smartphone and a laptop open.

Could this rumoured ASX IPO become a billion-dollar takeover target?

There might be a second chance to invest in a similar company to the one set to depart the ASX…

Read more »

IPO written in white with increasing arrows and a man holding out his hand.

Reddit stock soars 48% on debut! Will the ASX IPO market heat up again?

It was a great first day for Reddit.

Read more »

An arrow going upwards with a road sign saying 'IPO ahead'.

Should you buy into an IPO or wait until shares start trading on the ASX?

IPOs can be exciting, but also dangerous for investors.

Read more »

A female miner wearing a high vis vest and hard hard smiles and holds a clipboard while inspecting a mine site with a colleague.

ASX IPO alert: Blockbuster copper listing coming soon

Here's what you need to know about this upcoming IPO.

Read more »

IPO spelt out on a laptop with a red and green bar chart underneath.

Fewer ASX IPOs in 2023, but here's how they've performed

We reveal the top 10 new listings by size and how their share prices have changed to date.

Read more »

IPO written in yellow and stuck in the air.
Materials Shares

Rich listers are buying into the IPO of ASX lithium explorer Kali Metals

There's a new lithium share in town. Here's what you need to know.

Read more »

IPO written in circles with a man holding a smartphone and a laptop open.
International Stock News

The highs and lows of the Instacart $11 billion IPO

Here is a closer look at the latest company to hit the Nasdaq exchange.

Read more »