By Clancy Yeates
January 4, 2022 — 11.24am
, register or subscribe to save articles for later.
0
Leave a comment
One of Silicon Valley’s leading disruptors, Block, is set to soon sit alongside the likes of Woolworths, BHP and the Commonwealth Bank as a player on Australia’s sharemarket. It is hard to overstate how different this new entrant is to the “old world” companies that dominate the local bourse today.
Co-founded by Jack Dorsey, a bearded yoga enthusiast who until late 2021 also ran Twitter, Block (formerly known as Square) is joining the ASX through a dual-listing, as a result of its $39 billion buyout of Afterpay . Jack Dorsey of Square, left, and Anthony Eisen and Nicholas Molnar of Afterpay. Credit:AFR ASX investors will get the chance to bet on some of the most hyped themes on global markets, including the wild world of cryptocurrencies, and the technology sector’s efforts to take on entrenched banks.
Some see that as a huge opportunity. But Block will also have very different risks to the more traditional dividend-paying c ompanies, such as miners and banks, that dominate Australian share portfolios today.
So, what do local investors think of Block and its plan to disrupt banking? Will a US-based company with only a small local presence appeal to Australian shareholders? And what about its heavy exposure to cryptocurrencies?
Block was founded as Square in 2009, to allow anyone with a smartphone to accept credit card payments by plugging in a small white cube. You’ve probably seen them at a local small retailer or market stall. Block calls this part of its business the Seller app.
The other key part of Block is a consumer app that’s not available in Australia called Cash app, which allows its 70 million consumers to transfer money, or trade shares or punt on cryptocurrencies.
While the company started out in payments, it clearly has much wider ambitions – and Dorsey is a vocal advocate for cryptocurrencies. In December, it changed its name to Block to reflect these broader growth plans (and in a nod to blockchain technology that underpins Bitcoin). The move followed Facebook’s name change to Meta , to reflect the expanding virtual world or “metaverse”.
Outside finance, Block last year also bought a majority stake in a music streaming service called TIDAL, a deal that brought rapper and TIDAL shareholder Jay-Z onto the US company’s board.
The idea behind buying Afterpay – with the support of its co-founders Nick Molnar and Anthony Eisen – is that the Australian fintech will act as a bridge between Block’s Cash app and its Seller app.
Afterpay will gain access to Block’s extensive merchant and consumer customers in the critical US market, and Block will get Afterpay’s buy now, pay later and online shopping platforms. Supporters think the company’s long-term potential is to be a “super app” on par with China’s WeChat .
The merger is all-scrip, meaning existing Afterpay shareholders can choose to be paid in US-listed Block shares, or they can hold the stock through a dual-listing on the ASX. The final hurdle the deal still needs to clear is approval from the Bank of Spain, which is expected in early 2022.
Among institutional investors canvassed by The Sydney Morning Herald and The Age , there was widespread support for bringing the two firms together. Yet few investors had yet made up their minds about investing in Block, suggesting the stock may be just as divisive as Afterpay has been.
Ophir Asset Management portfolio manager Steven Ng, a long-time Afterpay shareholder, says the fund is open to retaining its stake in Block, assuming the takeover goes ahead. He says the merger should ramp up the growth of both Block and Afterpay’s businesses.
“From a Block perspective, it looks like Afterpay could act as the glue that brings together the Cash and Seller ecosystems,” Ng says. “I think it accelerates both Block and Afterpay’s strategy.”Investment analyst at Holon Global Investments, Todd O’Dea, says the merger should support Afterpay’s growth at a time of fierce competition in BNPL, but the fund has not determined whether it will invest in Block.“We will probably see a lot of consolidation in the next couple of years in that BNPL market. Being able to pair up with Block and get access to 70 million cash-app users will be very value accretive,” O’Dea says.Payments is the part of banking that is experiencing the most disruption from fintechs, and some see this as another attractive trait of Block.Jun Bei Lui, who manages about $1 billion […]
source Silicon Valley flair: Afterpay deal opens up a new world for investors
Protected by Patchstack