In regards to the Amazon deal. Here are the details from the linked SEC forms documenting the deal.
On November 10, 2021, in connection with the entry into the Commercial Agreement by Amazon Services and Amazon Payments, the Company issued to Amazon Services: (i) a warrant (the “First Warrant”) to purchase up to an aggregate of 7,000,000 shares of Class A common stock, $0.00001 par value per share (“Class A common stock”), of the Company (the “First Warrant Shares”) at an exercise price of $0.01 per share; and (ii) a warrant (the “Second Warrant” and, together with the First Warrant, the “Warrants”) to purchase up to an aggregate of 15,000,000 shares of Class A common stock (the “Second Warrant Shares” and, together with the First Warrant Shares, the “Warrant Shares”) at an exercise price of $100.00 per share.
So Amazon acquired 22M shares of Affirm in stock warrants, 7M at $.01 and 15M at $100. Some may call that buying revenue because of the delta between the warrants and the stock price, but I see it differently. In that Amazon is buying a stake in AFRM to the tune of 22M shares at a cost of whatever the revenue AFRM gains by gaining access to 40% of the worlds e-commerce GMV(or at least the US portion of that).
They have a similar deal with Shopify for the same purpose although I’m not sure of the details for the share warrants but they take about a $16M expense in S&M for “Shopify Warrants” each of the last few quarters. You can see that under financial statements at the bottom of the investor presentation here.
So the two e-commerce behemoths are now firmly vested in Affirm’s success. They must see something they like both to provide their customer’s the product as well as invest in the company.
On the question of Affirm vs Afterpay. They have historically different audiences. Affirm last year was a Peleton story but that has changed and will be less relevant even more. The size and market of the two companies (plus Klarna) as of the previous quarter is summarized in a chart found here.
-S8.2B in GMV (FY 2021);
-$870M in Revenue (FY 2021)
-~15.5B in GMV (FY 2021);
-$680M in Revenue (FY 2021)
avg transaction value
AFRM - ~$495 (FQ4 2021)
After - ~$150 (FY 2020)
And now with Affirm adding 73k (3.5x) merchants in one quarter it’s hard to compare those. It’s too big of a hyper growth.
As we said they have a Peleton problem that is less relevant moving forward. GMV was up 84% but excluding Peleton is up 138%. And that should accelerate based on guidance as well as revenue. Their already great looking guidance includes no impact from the Amazon deal. So…
That’s all the time I have for now but I find AFRM very interesting as a disruptor. I have some thoughts on the ecosystem they are building too, but am still researching it first.