Why has the Afterpay (ASX:APT) share price lost 7% in 3 weeks?

What’s got Afterpay shares in a funk lately?

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The Afterpay Ltd (ASX: APT) share price ended up having a pretty decent day of trading on Friday. This buy now, pay later (BNPL) share ended the trading day up a healthy 1.74% to $122.78 a share. That compared pretty well to the broader S&P/ASX 200 Index (ASX: XJO), which also ended the day higher but at a far more muted gain of 0.69%.

But zooming out a little, and the picture doesn’t quite look as bright for Afterpay. Over the past 3 weeks or so, this company has lost a little over 7% of its value. Afterpay shares were trading at a price of $132.11 back on Friday 23 September, but taking its last share price on Friday, we see a drop of 7.06% over those 3 weeks.

So what’s going on with Afterpay lately?

Why is the Afterpay share price down 7% in 3 weeks?

Well, the first thing to note is that it’s not just Afterpay shares that have been under pressure over the past 3 weeks. the entire ASX tech sector has taken a beating. The S&P/ASX All Technology Index (ASX: XTX) is also down around 3.1% over the same period. With many other ASX growth shares suffering similar fates. We can probably blame general market volatility, as well as a rise in the US 10-year Treasury bond yield, as underlying factors contributing to these woes in the ASX tech space.

But there’s another factor that could be playing into Afterpay shares’ woes too. As most investors would know by now, Afterpay’s days on the ASX are probably numbered. The company announced back in August that it is soon to be acquired by the US payments giant Square Inc (NYSE: SQ). Square offered up an all-scrip deal. This will see Afterpay shareholders receive 0.375 shares of Square for every Afterpay share owned.

This inherently ties the value of the Afterpay share price to that of Square shares. That’s because the ratio of Square shares that Afterpay investors will receive is fixed.

And lo and behold, the Square share price has also been struggling in recent weeks. Since 24 September, Square is down by roughly 5.75% (as of Thursday’s US market close). This would have also fed into investor sentiment for Afterpay shares over this time.

At Afterpay’s last closing share price of $122.78, this BNPL company has a market capitalisation of $35.03 billion.

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Motley Fool contributor Sebastian Bowen 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.

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