Finimize - 🤜 Square is coming for Klarna

Square transfers 29 billion dollars | HSBC makes investors an offer they can't refuse |

Hi Reader, here's what you need to know for August 3rd in 3:13 minutes.

🤓 Ether: the less handsome, less sporty, less popular younger brother of bitcoin. But hey, it’s those dark horses – not the jocks who peak in high school – you want to keep an eye on: just ask Grayscale’s Rayhaneh Sharif-Askary at An Intro To Investing In Ethereum on August 12th. Get your free ticket here

Today's big stories

  1. Fintech giant Square announced it's buying Afterpay for $29 billion
  2. The world’s garbage is piling up, but you could profit from the companies turning it into something more appealing – Read Now
  3. HSBC announced second-quarter results that were encouraging or worrying, depending on your perspective

Happily Ever Afterpay

Happily Ever Afterpay

What’s Going On Here?

US payments giant Square proceeded to checkout with plans to buy Australian fintech Afterpay for $29 billion on Monday.

What Does This Mean?

Afterpay is a buy-now-pay-later company that lets its 16 million customers spread the cost of an online purchase over a period of time, without racking up interest on those payments (providing they make them on time). It’s an area that’s gone gangbusters recently: Adobe Analytics has pointed out that use of buy-now-pay-later services had more than tripled early this year versus the start of the pandemic.

Square, for its part, is hoping the deal will boost both its consumer and business segments. In the former’s case, there’ll be more people in its orbit who it’ll be able to win over to its money transfer service, Cash App. And since Square’s business customers will be able to offer even more payment options to their customers, it should increase revenue on the business side too.

Why Should I Care?

For markets: There may be trouble ahead.
No cash is actually changing hands here: instead, Afterpay’s investors will receive 0.375 Square shares for every Afterpay share they hold. That might’ve made sense to Square’s top brass, given that its stock has doubled in the last year. But as is traditional when a firm agrees to buy another one, its stock actually fell on Monday: a deal this big on a company in an area ripe for a crackdown isn’t without risks, after all...

The bigger picture: The industry’s proving its mettle.
Afterpay’s revenue was $693 million last financial year, which means Square’s $29 billion purchase price represents 42x trailing revenue. That might seem high, but Swedish rival Klarna was valued at $46 billion back in June with revenue of around $1.2 million in 2020 – a 38x multiple (tweet this). America’s Affirm, meanwhile, began Monday valued at roughly 20x revenue. Investors have noticed: they sent Afterpay’s shares up 6% following the announcement.

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2. Analyst Take

Why Garbage Is More Treasure Than Trash

What’s Going On Here?

Let’s start with the not-so-good news: our throwaway lifestyles are becoming a problem.

In fact, according to the World Bank, the amount of garbage we produce is going to be growing twice as fast as the world’s population by 2050.

Now for the good news: there are companies out there trying to deal with the problem, in what’s all part of the “circular economy”.

And investors clearly see it as a lucrative opportunity: the amount of money invested in circular economy-focused stock funds has jumped sixfold to $2 billion since the start of 2020.

So that’s today’s Insight: how you can invest in the circular economy too, and just how big this garbage opportunity could be.

Read or listen to the Insight here

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Hush Money

Hush Money

What’s Going On Here?

HSBC announced underwhelming second-quarter results on Monday, but the British bank sweetened the deal with a little somethin’ somethin’...

What Does This Mean?

HSBC’s investment banking revenue dropped 25% versus the same time last year, and its savings and lending business – which is usually pretty reliable – failed to pick up the slack. Still, at least the bank was able to free up a chunk of the money it’d put to one side in case customers couldn’t repay their loans, bringing the bank’s profit in above expectations.

Those “reserve releases” also mean HSBC thinks it’ll be able to exceed one of its prior targets: the bank had wanted to pay out 40-55% of its annual profits as dividends from next year, but it thinks it’ll be able to do it this year instead. The bank’s even looking at adding some share buybacks into the mix too.

Why Should I Care?

For markets: Divided over dividends.
HSBC is one of the biggest dividend payers among European banks, and analysts are expecting it to pay out more than its rivals over the next few years. But that might not be as much as the bank would like: its costs were higher than expected last quarter, with the 3,500 staff cuts it made in the first half of the year not enough to offset surging tech spending and bonus payments. So higher dividends now are great and all, but they won’t matter much if they come at the expense of future payouts.

The bigger picture: China without the risk. 
Some investors like HSBC because its stock offers exposure to the fast-growing Asian market via the bank’s businesses in China and Hong Kong, without the risks involved in owning the region’s stocks directly. Government crackdowns, after all, are cropping up increasingly frequently in the country. And those investors might be onto something: Chinese stocks fell 4% after regulators reared their ugly heads again last week, but HSBC’s only fell 1%.

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💬 Quote of the day

“Life would be tragic if it weren’t funny.”

– Stephen Hawking (an English theoretical physicist, cosmologist, and author)
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🌎 Finimize Live

🤓 The math checks out

Apparently $7 trillion changes hands on the forex market every day. So we asked our analysts to crunch the numbers, and they’ve found that, yep, $7 trillion is a lot of money. And that means there are some big opportunities waiting to be scooped up for the savvy investor. That’s How To Make Money From Money.

💰 How To Make Money From Money: 3pm UK time, August 4th
🎨 Are Collectibles Worth All The Hype?: 6pm UK time, August 9th
🏡 How To Buy Property Without Buying Property: 6pm UK time, August 10th
🤖 What’s Next For DeFi in 2021? 1pm UK time, August 11th
🔥 How To Invest In The Next Big Thing: 5pm UK time, August 11th
🤑 What Will Ether Be Worth in 2030? 5pm UK time, August 12th
How To Be Greener About Bitcoin: 1pm UK time, August 17th
💥 How To Profit From The Commodities Boom: 5pm UK time, August 18th
🔌 Strategies To Supercharge Your Investments: 1pm UK time, August 20th
😎 How To Profit From Smart Contracts: 5pm UK time, August 24th
🤔 Are You An Investor Or A Trader?: 12pm UK time, August 25th
♻️ How To Turn Your Portfolio Green : 6pm UK time, September 23rd

🎯 On Our Radar

  1. Burning Man forever. The festival’s canceled again, but that’s not stopping some people.
  2. The master’s trap. Inside America’s predatory graduate programs.
  3. Why women are faking it. Love Island plays a part.
  4. This man spent $30 million building a wall. Now he just needs a buyer.
  5. Guilty until proven innocent. The reality of traveling with a “bad” passport.
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