The S&P/ASX 200 Index (ASX: XJO) has opened this Thursday on a rather negative note. The ASX 200 is currently down a nasty 1.11% and is going at 7,482 points at the time of writing.
But that's nothing compared to the Afterpay Ltd (ASX: APT) share price. Afterpay shares have been savaged today. At the time of writing, the buy now, pay later (BNPL) pioneer has lost a demoralising 9.5% and is sitting at $72.86 a share. That comes after it fell as low as $71.65 a share just after market open (down 10.7%).
That's the largest one-day drop for Afterpay since at least the gyrations we saw back in February last year. And possibly since the COVID-induced market crash back in early 2020. As it stands today, Afterpay has now lost more than 22% of its value over the past month alone, and more than 45% since early August.
So what's behind this apparent collapse in investor sentiment today?
Why is the Afterpay share price getting hammered today?
Well, we can't say for sure. But it appears a sharp drop in the US markets overnight may have had something to do with it. Last night saw many prominent US tech shares' share prices massacred following some hawkish comments from the US Federal Reserve.
As we covered in depth earlier this morning, the Fed's latest minutes reveal that the Bank is considering bringing forward a 'tightening' of US monetary policy. That could mean higher interest rates sooner. As well as a 'tapering' of its quantitative easing programs.
Many tech shares' valuations are particularly vulnerable to tighter monetary policy due to their debt burdens and (in many cases) pre-profit growth stages.
And one of the tech shares caught up in the US sell-off was none other than Block Inc (NYSE: SQ). Block is the US payments giant formerly known as Square that is lining up to acquire Afterpay in full. Since the Afterpay-Block deal announced back in August is an all-scrip one (0.375 shares of Block for every Afterpay share owned), the Afterpay share price now has a direct link to that of Block.
And last night, Block stock was hammered. It fell a nasty 8.2% and finished up very close to its new 52-week low at US$143.49 a share. That means the value of the Block shares that Afterpay shareholders will receive if this deal reaches the finish line also fell by 8.2%. So it's perhaps no surprise that Afterpay shares are getting a drilling today.
At the current Afterpay share price, this BNPL share has a market capitalisation of $21.64 billion.
