Affirm began trading on the Nasdaq on Wednesday with its shares jumping by more than 100% in the first day, laying the groundwork for huge growth in the buy now pay later space.
The BNPL company was founded in 2012 by CEO Max Levchin, who had previously made a name for himself as one of the co-founders of PayPal. In recent years, he’s also been a keen investor in FinTech companies such as neobank HMBradley, API provider Teller and corporate card issuer Brex.
On its first day of trading, Affirm’s stock value jumped from $49 per share to $100 per share. The San Francisco-based company offered 24.6 million shares of its Class A common stock.
Rumours about an upcoming IPO began to spread across the industry in 2020, amplified by Affirm’s $500m Series G round in September, which was one of the ten biggest capital investments recorded in the FinTech industry last year. Those whispers suggested that Affirm was in talks with Goldman Sachs about how an initial listing should take place.
Given Goldman Sachs acted as one of the lead book-running managers to the IPO together with Morgan Stanley and Allen & Company, those rumours have now been confirmed.
The venture’s backers include GIC, Durable Capital Partners, Lightspeed Venture Partners, Wellington Management Company, Baillie Gifford, Spark Capital, Founders Fund and Fidelity Management & Research Company LLC.
Affirm’s public listing also serves as a confirmation of the opportunities available in the BNPL sector. A Bank of America survey predicted in December that apps such as Affirm, Afterpay, Klarna and PayPal were poised to grow between ten and 15 times by 2025 “to eventually process between $650bn and $1trn in transactions.p>
Part of that growth is due to e-commerce having become more popular during the pandemic.
But, according to the Bank of America survey, it is also due to several other factors. One is the fact that new markets are constantly being introduced to these services.
A second is that the merchants who tap into these services seem happy to pay the fees for the privilege as it boost sales. Moreover, with many of the customers utilising the services being in their 30s or younger, more people are only set to join the party in the years to come.
So, it is no secret why the investments keep rolling into the BNPL sector. Last week, for instance, Uplift announced that it had secured a $68m credit line from Atalaya Capital Management. The round followed on the back of similar raises by BNPL startups Zilch, Split and Tabby.
When Affirm rival Klarna secured a $10.65bn valuation in September on the back of closing a $650m round it became Europe most valuable privately owned FinTech company. At least for a while. That title was claimed by Checkout.com earlier this week after the payments company closed a $450m Series C funding round at a $15bn valuation.
Other companies have also made moves to enter the BNPL space. For instance, PayPal has recently launched an instalments solution in the US and in the UK, Curve has teamed up with Thought Machine to power its instalments startup Curve Credit and in Denmark challenger bank Lunar announced plans to also enter the space in October on the back of a ?40m cash injection.
So, with Affirm having made its public debut to thunderous applause, it seems as good things are coming for the BNPL sector.
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