The biggest buy out in Australian history has big implications for property.
So Afterpay hey?
What an epic story. This company listed just 6 years ago. Now, with US Fintech giant Square wanting to buy it out – making it far and away the biggest buyout in Australian history – it’s now worth a whopping $39 billion dollars!
Huge.
I’m guessing you saw this. It’s all over the paper. Aussie tech firm does good. Australia punches above it’s weight. Etc.
And look, not to piss on the chips, but I’m not sure the story is so simple.
There’s actually three competing stories as far as I can tell. And the story I believe in has huge implications for property.
So let me tell you some stories.
Story #1 – Massive vindication for BNPL
This is the pudding that proves that buy now pay later (BNPL) is here to stay, and the disruption to fuddy-duddy old finance is complete.
Afterpay is the poster-child for this disruption, and the Square buy-out proves the Afterpay business model, BNPL as a concept, and the deft touch and skill of the Afterpay management team.
Oh, and also that little old Australia is not a tech force to be reckoned with.
Nothing but sunshine.
Story #2 – Ringing the bell of the BNPL bubble
Afterpay has never turned a profit and trades at a massive multiples on current sales.
BNPL itself is just glorified lay-buy, and the only reason the sector has got a beachhead in the financial sector is because they’ve had the cajones to go where no bank would dare to go – providing credit to customers without a credit check.
But now that that regulatory modesty has been swept aside, banks are going to come get their slice of the pie.
You’ve also got PayPal and Apple trying to get in on the action.
Consolidation is inevitable. Margins will get crushed. The whole sector will be swallowed by big finance.
Afterpay’s founders sold out at exactly the right time.
Bravo lads.
Story #3 – The BNPL bubble just got eaten by the US Tech bubble
The squadrillions of dollars that have been printed in the past 18-months, together with record low interest rates, have created a bubble in US tech.
Companies like Square are flush with cash.
That cash has to go somewhere, so why not buy and strong up and coming company with the power to drive your own BNPL offering?
The tech bubble is eating up the BNPL bubble.
But actually bubble isn’t the right word. This is just what happens when money is so cheap and plentiful.
The price of assets – anything making money (or promising to make money).
We saw it after the GFC.
This is history repeating.
Massive money printing creates massive asset price inflation.
Oh, you know what else is an asset? Property.
So if you can’t buy Afterpay – and I reckon you’ve definitely missed that boat – buy property.
That’s what I’m doing.
JG.