The two Australian founders of Afterpay are set to sell their company to an American finance firm for a whopping $39 billion.
The eye-watering deal between US fintech company Square Inc and Afterpay was announced this morning.
Twitter boss Jack Dorsey is the chief executive of Square Inc.
The transaction is expected to be finalised in the first quarter of calendar year 2022, according to a statement from Square Inc.
Sydney-based Afterpay founders Anthony Eisen and Nicholas Molnar launched the company, which is the leader in the buy now, pay later sector, in 2014. They will stay on at the company.
Afterpay shareholders will receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay ordinary share they hold on the record date.
“Square and Afterpay have a shared purpose. We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles,” said Jack Dorsey, Co-Founder and CEO of Square.
Afterpay announced last month it had recorded $11.1 billion sales in the last financial year, a 112 per cent increase from the year prior.
According to Afterpay, it has now 9.9 million active customers, with 91 per cent of sales coming from repeat purchasers in the last quarter of FY20.
How does Afterpay work?
Afterpay is a buy now, pay later model that allows shoppers to break up the total cost of their purchase into smaller payments.
It’s a little like a reverse lay-by system, whereby you get to take the product home straight away.
Afterpay breaks up the cost of your item into four instalments, which are due every two weeks.
If you bought a $1000 item with Afterpay, you’d need to pay it off in $250 instalments over two months.
Unlike a loan from a bank, Afterpay does not charge the consumer interest for their service.
If customers miss an instalment payment they will be charged a late fee that starts at $10 and is capped at 25 per cent of the item’s purchase price or $68, depending on which is less.
Afterpay makes money by charging a commission to businesses on each purchase made through the platform.