Block & Tackle
Today Square announced its changing its name to “Block” citing that Square related to the seller business where as the business was about building an overarching ecosystem, hence a different name was needed…
Also, today APT has postponed the Scheme meeting from December 6 due to delays with regulatory approval from the Bank of Spain. The deadline for the approval is 21 Feb but they expect it to be approved by mid January and are looking at ways to proceed with the Scheme pre-approval.
Neither announcements have an impact on my view on valuation. The APT share price will be smashed today due to market moves in the US overnight, not these announcements.
Disc: I own APT (RL+SM)
Jack resigns as Twitter CEO
Jack Dorsey (CEO of Square and Twitter) has resigned as CEO for Twitter (see tweet below). Given APT will become 20% of the Square business in early 2022 it is good to see that Jack now has one CEO job to focus on. His split attention was an issue that now seems to be addressed, I am sure he could do both jobs, but he’s going to do a better job focusing on one
There isn’t a lot of cross over between the Square and Twitter business, but you could argue that Square’s consumer customer base has something in common with Twitter uses, so having a figure on the pulse will help – but I don’t see that as worth the lack of focus.
Disc: I own APT (RL+SM) and hence will own SQ.
22-Oct-2021: Just a comment on @Slymeat's APT straw today discussing PayPal's "PayIn4" vs Afterpay. I believe PayPal only offer this service to their customers who have track records of paying using PayPal, i.e. no chargebacks or disputed transactions, and they also require more than one payment method to be in file. For instance I have 4 credit cards and a savings account linked to my PayPal account, others might have a savings account and one credit card, but PayPal's terms of use do make it clear that if one payment method fails, they will use one of your alternative methods of payment until the payment settles. If none of your payment methods work, I would imagine you would be unable to process any further payments using PayPal until you pay what you owe them.
I am what you might call a PayPal heavy user, because I was burned a few years back, or inconvenienced really because the bank reversed all of the transactions for me, when my credit card details were stolen from one of the online stores that I was using. I strongly suspect it was epharmacy.com.au, the online arm of Chemist Warehouse. I ended up being charged thousands of dollars for stuff I had not ordered and did not receive from an online electronics store in Sydney and from Telstra. All sorted, but from that point on I have used PayPal for online payments and have had no issues. And I do order a lot of stuff online. Almost everything, including our family's weekly groceries from Woolworths, prescription meds, alcohol from Dan Murphys, all of the essentials, plus a lot of other stuff.
The big advantage that Paypal's "Pay In 4" has over Afterpay is that Paypal do NOT charge late fees, ever. Afterpay derive significant income from late fees.
There are a few other big players also entering the market, such as:
Apple's Pay Later service:
Apple Launching (AAPL, GS) "Buy Now, Pay Later" Installment Plan Service (AFRM) - Bloomberg
Apple And Goldman Sachs To Launch Apple Pay Later, A Buy Now Pay Later Service (forbes.com)
Apple And Affirm Pair Up As BNPL Goes Global | PYMNTS.com (04-Aug-2021)
And CBA:
StepPay - a new way to buy now, pay later (commbank.com.au)
Does have late payment fees, and a $1,000 limit.
My personal view is that Anthony Eisen and Nicholas Molnar are selling Afterpay at exactly the right time. They are getting out at the top of the market for Afterpay. There is plenty of competition coming, and first-mover-advantage is no longer the advantage that it has been.
Disclosure: I do not hold shares in APT, PayPal, Apple, or CBA directly, but I do hold MFG and also own units in some of Magellan's listed funds (MHH and MGF) and I believe they still hold PayPal and Apple.
I have just been taking a look at APT financials as an excerise better understand the hype, potential value and a learning exercise in accounting. I can't see anything but a perpetual cash burning machine when you look at the accounts. First big warning sign is looking at the presentations, there seems to be a theme of "underlying management adjusted EBITDA*` (+5 small text notes)" or there own metrics they deem important. I get the feeling standard accounting rules are inconvient for them? Is EBITDA compared to NPAT a relevant measure when you are a finance based company?
Moving to the cash flows, they look nothing like the P+L statement. P+L is based on revenue from transations rather than the actual sales and receivable payments from users in the cash flow statement, this part makes sense to me. I also understand that the cash goes out before the cash comes in for APT so you do have to account for the time difference in receiving the cash from users. However, looking at the financing section, all you see is capital raising and debt issuance that is keeping the company afloat. Very high cash flow losses are recorded in the operating + investing cash flow statements but in the P+L statement losses don't appear so bad.
Anyways, I know this sounds like bear case straw more than a forum post but I am hoping to start a bit of a conversation to see if someone might be able to provide me with some guidance or if you see the same structural issues as I do?