If you’ve spent recent days trying to guess the moves of the Chinese Govt, you’ll have missed Australia’s largest-ever deal



No, no-one acquired Newcrest, one of the world’s largest gold miners at a 70% premium

Square bought, “Buy now, pay later” company, Afterpay (AP)

They must have some unique technology

No, but they do have a great Vision

“Fairness & Financial Freedom for all”

and Visions aren’t cheap

Well I do value Fairness & Freedom

But does Square get anything else for $29bn?

They get 4 values:

Keep it real
Do the right thing
Be brave
Shape the future”

AP advertises:

“No external credit checks, no interest, no fees – when you pay on time, no surprises & our customers love us for it”

Well, no one wants surprises right now, least of all Chinese tech investors – their nerves are shattered

Who are their customers?

73% are Millennials & Gen Z

And how does it work?

“Make the first of 4 payments at the time of purchase & the rest over 6 weeks”

How do they make money?

It looks like they get 3.8% of retailer sales + late fees

Oh, like Blockbuster?

Well, did Blockbuster “protect” you like this?

“To protect you, our late fees are capped, for each order below £24, a maximum of one £6 late fee may be applied per order. For each order of £24 or above, the total of the late fees that may be applied are capped at 25% of the Original Order Value or £36, whichever is less.”

So let’s run the numbers

GenZ buys jeans for £24 requiring 4 equal payments

But they pay £6 now so only have £18 outstanding

And if they party too hard & miss the 1st payment, they get a £6 late fee

Equal to 33% of their outstanding balance a week or so later

33%, didn’t they say 25%?

ahh but that’s of the order value, not outstanding

Oh, I thought they said, “no surprises”

And with interest rates so low, how is 33% over 2 weeks

“Keeping it real”… Dude?

Their marketing guide for retailers is helpful because it suggests retailers don’t advertise:

“no fees”

but rather

“no fees when you pay on time”

and don’t say




And they provide a disclaimer for the retailers to use – how kind

“If you fail to pay on time, your Clearpay debt may be passed to a debt collection agency & this may affect your ability to use Clearpay in future.”

Oh, so this is basically a payday loans business for GenZs & Millenials

Does the debt collection agency “do the right thing?”

I suspect not

The Afterpay annual report shows that the top 10% of customers use it 31x p/a across 6 verticals & 14 merchants

And late fees only apply “per order”…

But “shaping the future” aside

Is this a good investment for Square?

Well, Afterpay lost $79m in H1

But generated A$5m ($3.7m) in operating cash flow – adjusted of course

so $29bn for $3.7m of H1 cash flow

and 21x book value

You can buy a profitable European Bank for a fraction

The only people who need to “Be brave” and “Keeping it Real” are Square shareholders