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Today's big stories

Payment platform PayPal announced it's buying Japanese buy-now-pay-later startup Paidy
One valuation guru has laid out the three things you need to do to value any company – Read Now
The UK government is planning to raise taxes to claw back some of the cash it spent during the pandemic

Debt Collector

What’s Going On Here?

PayPal announced this week that it would buy Japanese buy-now-pay-later startup Paidy for $2.7 billion, and the US payment platform is good for it. Honest.

What Does This Mean?

PayPal started offering its own buy-now-pay-later service last year, and customers have since used it to make $3.5 billion worth of purchases. This deal, then, comes as part of the company’s longer-term plan to push further into the industry. And where better to take the next step than Japan: the Holy Grail of aspirational payment services is both home to the world’s third-biggest online shopping market, and a place where nearly 75% of all in-person purchases are made in cash. That makes it one of the few developed countries where notes still have the edge on digital payments, and means Paidy – which already has 6 million users – has plenty of room left to grow.

Why Should I Care?

For markets: Competition is kicking off.
Buy-now-pay-later companies can’t seem to put a foot wrong these days, with the market more than tripling in size in 2020 amid the pandemic-fueled ecommerce boom. And things aren’t showing signs of slowing down: Square agreed to buy Aussie buy-now-pay-later firm Afterpay for $29 billion just last month, while Sweden’s Klarna – now Europe’s most valuable startup – saw its valuation quadruple between September and June to hit $46 billion. But that kind of money draws a crowd, and this once-exclusive club is only going to get a whole lot busier…

For you personally: Buy now, pay… now?
Not everyone is delighted with the craze, mind you: regulators are worried that customers are forgetting the “pay later” part of the deal and racking up a pile of debt. And if the companies themselves don’t start doing more to prevent that from happening, those regulators might be more than happy to step in and roll out some profit-damaging measures of their own.

You might also like: How to keep yourself from getting into debt.

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Analyst Take

Aswath Damodaran's Three Need-To-Know Valuation Lessons

What’s Going On Here?

The idea of valuing a company comes up a lot in investing discussions.

But it’s also one of those theories that no one ever stops to actually, y’know… explain.

That’s why it’s nice to know that Aswath Damodaran – one of the world’s foremost experts on valuation – has boiled the concept down to three simple-but-essential lessons.

Lesson one: valuing a stock isn’t the same thing as pricing a stock, and the gap between the two is where investment opportunities emerge.

Lesson two: a stock’s value is determined by four key drivers, which you can then put into practice to build a discounted cash flow model – the most theoretically sound of valuation models.

And lesson three: a good valuation isn’t just based on numbers. It has to have a good story.

Not sure what that means? Good thing it’s all in today’s Insight.

Read or listen to the Insight here

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