Shopify earns $ 2 billion on Affirm IPO, six months after partnership

Shopify has just entered a giant growth year as the Covid-19 pandemic spurred massive growth in online shopping. Now it starts with 2021 with a bang thanks to an 8% stake in Affirm, the first notable technological IPO of the year.

Both companies have seen their businesses explode since early last year, when Covid-19 forced physical retailers to close, prompting consumers even more to shop online.

Shopify’s share price nearly tripled in 2020 as retail chains, restaurants and grocery stores used their software to create fast web store fronts, manage payments and keep their businesses running. Its market capitalization exceeded $ 140 billion. Founded in 2012, Affirm works with retailers to offer consumer loans, enabling buyers to pay for items like Peloton bikes, Dyson vacuum cleaners and Oscar de la Renta handbags in installments.

The two companies partnered with online lender Affirm in July to become the exclusive provider or point-of-sale financier for Shop Pay, Shopify’s payment service. As part of the deal, Shopify received warrants to buy up to 20.3 million shares in Affirm.

With Affirm’s Nasdaq debut on Wednesday, Shopify’s stake is worth about $ 1.9 billion. Confirmation rose 98% to $ 96.84 from early afternoon in New York.

With the partnership, Affirm becomes the provider of Shopify’s new ‘buy now, pay later’ financing service called Shop Pay Installments, which was launched at the end of last year for some US retailers.

Affirm said in its prospectus that the Shopify deal makes it possible to significantly expand the number of merchants and consumers on our platform. Shopify serves more than a million businesses and said in October that gross merchandise volume more than doubled in the third quarter from a year earlier to $ 30.9 billion.

At the time of the announcement, CEO and founder Max Levchin told CNBC that Shopify and Affirm would have a ‘strictly integrated partnership’ that could ‘let retailers’ spin the product.

“We expect a massive survey,” Levchin said in the interview. “By making integration so easy, we expect it to be very close to overall ubiquity.”

The merchant diversification that Shopify offers is important to Affirm, which in recent times accounted for 30% of Peloton’s revenue.

But access to Shopify’s extensive customer base is very expensive – Affirm has given Shopify the right to buy more than 20 million shares at a cent each. A quarter of the shares issued in the original warrant were settled in July. The remaining 15.2 million was allocated to the IPO.

Shopify is Affirm’s third largest shareholder. The only major owners are founder and CEO Max Levchin, whose 11% stake is worth $ 2.7 billion, making him the youngest member of the so-called “PayPal mafia” to become a billionaire, and Jasmine Ventures, which is part of the sovereign wealth in Singapore. funded GIC and owns 9%.

The next top holders are Lightspeed Venture Partners, Peter Thiel’s Founders Fund and Khosla Ventures.

Shopify shares changed little on Wednesday, trading at $ 1,188.73.

LOOK: Establish a partnership with Shopify to offer ‘Shop Pay’ installments