Overnight, shares in the payment processing business closed 3.89% higher on Wall Street to US$261.07.
Let’s take a closer look at what this could mean for Afterpay shares today.
What the rising Square share price could mean for Afterpay shares
As has been well-publicised, Square agreed to purchase Afterpay for what was valued at the time at $39 billion – the largest M&A deal in the history of the ASX.
The deal, however, is not for cash – but entirely scrip. For every one Afterpay share held by an investor, they will receive 0.375 Square shares. On 2 August, when the deal was announced, the Square share price was US$247.26 – which valued Afterpay shares at $126.21 per share.
The higher price of Square means a higher valuation of Afterpay. Using the latest Square value and current exchange rates, Afterpay shares are now worth approximately $135.21.
The Afterpay share price closed yesterday down 0.38% to $126.23. So, in theory, Afterpay shares could open roughly 7% higher today.
Why is it rising?
According to our friends at The Motley Fool US, the market debut of competitor Toast Inc (NYSE: TOST) seems to have spurred on the Square share price.
Since its initial public offering (IPO), shares in Toast have surged 54%, and it seems the rising Toast tide lifted all boats in the fintech sector – including those in Square.
Regardless of the reason behind Square’s latest rise, the news could be good for the Afterpay share price.