In their quarterly trading update today, Afterpay (APT.AX) touted their successes in North America. They had achieved 211 percent underlying sales growth in the US for the quarter, with the US now the largest contributor to underlying sales. North America now accounts for 9.2 million of Afterpay’s 14.6 million global active customers and the US was the first region to record more than $1bn in underlying sales in a single month.
It is under this backdrop that Afterpay has decided to pursue a US listing ‘given the US market is now the largest contributor to our business and is expected to continue to grow strongly’.
Afterpay intends to remain an Australian headquartered company and there is no timeline set for a Board decision on a US listing. Such as listing would also be subject to market conditions and approval by regulators and a US exchange.
It has been reported today that discussions around a US listing were in fact well advanced, with Afterpay potentially delisting from the ASX as part of this process. It has also been reported that US bank Goldman Sachs has been appointed to explore and advise on the potential listing.
It is believe (and probable) that a US listing would increase the value of Afterpay, which is currently trading around 27 times forward revenues. While the current valuation is extremely high, there is no reason to believe it wouldn’t be pushed higher by US investors who are notorious for paying extreme multiples for high-growth stocks.
Indeed, competitors such as Klarna and Affirm have at times achieved similar valuations despite dealing in smaller volumes than Afterpay.
I’ve personally never been a fan of Afterpay, the valuation is simply too far beyond mathematical justification. These are the sort of stocks that lose seventy to one hundred percent of their capitalisation during market collapses. However, in a strong bull market, it is a near certainty that a US listed Afterpay would command a higher valuation than an Australian listed Afterpay.
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