Key Points
- Afterpay shares returned 11,700% from IPO to end of 2020
- But they were down 30% over 2021, which was the first year of negative returns
- Afterpay shares will turn into Block shares later this month, and experts are not confident about its prospects
There's no doubt over the last few years Afterpay Ltd (ASX: APT) became the poster child for how ASX shares can make people wealthy reasonably quickly.
The buy now, pay later provider issued shares at $1 apiece during its initial public offer (IPO) back in 2016. It closed 2020 at $118, meaning a phenomenal 11,700% return for those lucky folk.
So if you had bought $10,000 of shares at IPO, they were worth $1.18 million on 31 December 2020.
But how did the stock fare in a very eventful 2021?
A historic year for Afterpay, in multiple ways
Unfortunately for investors, last year was the first time in Afterpay's history that its share price ended lower than where it started.
The stock closed 2021 at $83.01, meaning a 29.65% loss over the calendar year.
Notwithstanding this, the Afterpay business had a massive year.
The biggest news came in August when US fintech Block Inc (NYSE: SQ) — then named Square — announced it would wholly acquire the Australian firm for what was then $39 billion.
As it is an all-scrip deal, ever since then, Afterpay shares have risen and fallen in synchronisation with the Block stock price.
But the bad news for investors was that Block has been caught up in the general technology sell-off in the US over the past few months.
In fact, Black shares have lost almost 45% since late October. The Afterpay stock price has plunged more than 40% over the same period.
Now that takeover is worth about $23 billion, not $39 billion.
The Nasdaq Composite (NASDAQ: .IXIC) has only dipped about 3% over that time, thanks to a handful of mega-cap tech giants cancelling out the losses of smaller constituents.
Will Afterpay shares rally in 2022?
As The Motley Fool's James Mickleboro first reported, Atlas Funds Management chief investment officer Hugh Dive is not at all confident about a recovery in Afterpay stock as it nears its conversion to Block ASX shares.
"As we have no unique insight into Square's global merchant payments activities and are alarmed at its price-earnings ratio of 156x, it is tough to pick AfterPay as the sharp recovery candidate in 2022," he wrote on the Atlas blog.
Block has also been criticised for giving away new shares to its employees like coffee, regularly diluting existing shareholders' value.
According to the Australian Financial Review, Block had 235 million shares on issue when it listed in 2015. By June last year, that had ballooned to an eye-watering 523 million.
