The Square share price jumped 4% overnight. What could this mean for Afterpay (ASX:APT) shares?

The Afterpay share price could be on the move today following the overnight rise of Square.

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The Square Inc (NYSE: SQ) share price will be of keen interest to Afterpay Ltd (ASX: APT) shareholders.

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.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. 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.

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