Why is Block listing onto the ASX?
The reason why Block is listing onto the ASX is the proposed takeover of the buy now, pay later (BNPL) business Afterpay Ltd (ASX: APT).
Block is on track to take over Afterpay. The offer is 0.375 new Block/Square shares for each Afterpay share. When the New York Stock Exchange closed on 29 October 2021, the implied offer was A$126.39 per Afterpay share, which was a 30.8% premium to the undisturbed Afterpay share price on 30 July 2021 before the proposed takeover was announced.
Block shares are going to trade in Australia as a secondary listing, to allow Afterpay shareholders to trade Square shares via CHESS Depositary Interests (CDIs) on the ASX.
The takeover is legally effective and Afterpay anticipates that the implementation will occur in the first quarter of the 2022 calendar year.
What makes it so important for the ASX?
As reported by the Australian Financial Review, the ASX’s group executive for listings, Max Cunningham, said:
It could be the most important listing on the ASX since BHP in 1885 and I don’t say that lightly.
We’ve been talking for years about attracting a combination of local and foreign tech listings. They could have found other ways to fund this, so for them to consciously list here is really, really significant.
The Block share price has fallen around 40% since the end of October 2021. Despite that, Block’s current market capitalisation is still US$66.7 billion. It will be one of the biggest businesses on the ASX.
But the ASX believes it could be an opportunity to encourage other large businesses to have a dual listing on the ASX as well.
The AFR quoted Mr Cunningham about this:
Hopefully it will demonstrate to other Australian multinationals either already listed overseas or hoping to list overseas, you can be dual-listed on the ASX as well.
For all the great tech we’ve had, we don’t have anything like a Spotify listed here. Certainly, having a company like Atlassian or Canva list here would be great and help offset some of those carbon-intensive stocks. I think it’s really, potentially, an important pivot point.
Will more businesses list here?
There is a hope that more tech and non-tech businesses will list. As mentioned, Atlassian and Canva are two of the biggest targets.
There is apparently a pipeline of potential opportunities according to the comments made by Mr Cunningham.
In terms of more potential listings, the AFR reported he said:
We’re definitely hoping there may be some $1 billion-plus tech companies in the pipeline. We’re still getting good quality, larger tech companies coming and the pipeline for tech companies is better than it’s ever been. There’s some good prospects out there.
BHP Group Ltd (ASX: BHP) will soon unify its structure onto the ASX, so the Australian Stock Exchange is hoping balance that out with other non-resource companies..
Once international travel resumes as normal, the ASX is confident that as face to face meetings return, it will be able to win more international businesses as well.