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Today's big stories

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

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.

You might also like: How you can invest in the next big fintech.

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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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