Publication details

The Age

August 7, 2021

Squared off: Afterpay deal powers Jack Dorsey's 'super app' dreams


Cara Waters and Clancy Yeates

It was already one of the most divisive stocks in the market, thanks to its volatility and sky-high valuation, and now Afterpay investors are grappling with the idea of Square shares landing in their portfolio on the back of the proposed $39 billion tie-up between the two payments heavyweights.

Afterpay has had its fair share of doubters and true believers. Now the local market will need to get its head around Square, the payments behemoth started by Twitter billionaire Jack Dorsey, which will become one of the top 20 companies listed on the Australian Securities Exchange, provided the mega-deal goes ahead.

The all-scrip bid for Afterpay - the largest takeover in Australian history - allows Afterpay shareholders to either receive shares in Square listed locally on the ASX or on the New York Stock Exchange (NYSE).

Most Australians probably know more about Square’s enigmatic founder and chief executive than the business. But Square’s payment readers - the small, white plastic squares smaller than a mobile phone - have been popping up at cafes and small retail stores around the country since 2016.

The company, valued at $US129 billion ($174 billion), has subsequently expanded its products in Australia to include an ecommerce offering, loans and invoicing. Australia is Square’s biggest market outside the United States but it’s far from ubiquitous here.

Most of Square’s Australian customers are micro and small businesses, and while the entry costs to using its systems are low the fees it charges are often higher than competing payment systems and the big four banks.

A spokeswoman for Square declined to detail its number of Australian customers but the company recorded more than $US5 billion in revenue for the first quarter of the year globally and, according to Square’s earnings letter, it doubled its profit in Australia “due primarily to strong acquisition of new sellers and continued growth upmarket”.

Square’s former country manager for Australia, Ben Pfisterer, who left the payments company to start fintech Zeller, says Afterpay had popped up on Square’s radar a while ago.

Pfisterer, who helped make an initial introduction between Dorsey’s team and Afterpay co-founders Nick Molnar and Anthony Eisen, says while there was an immediate affinity between the parties an acquisition wasn’t on the table.

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