For those who own APT

There are a few here who follow the Australian firm Afterpay (APT). I just received notification from my broker that on June 14, 2019 there were 4.5 million shares sold by an “insider”. This might be a factor in the disruption of the stock’s price over the past week.

Jeff

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Hey Jeff,

This article explains all the action with Afterpay in the last fortnight :

“Millennials are more scared of credit-card debt than they are of dying,” Afterpay co-founder Nick Molnar told his New York audience at a popular beauty industry event on June 4. “That’s a bold statement.”

At a conference like the WWD Beauty Summit, where he was rubbing shoulders with former supermodel Cindy Crawford, that may have sounded a bit controversial. But it was nothing compared to what the most polarising stock on the ASX would serve up to the market over the next 10 days…

https://www.smh.com.au/business/companies/horrendous-timing-…

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This article explains all the action with Afterpay in the last fortnight…

Holy Mackerel!

Here Afterpay was in the preliminary stages of being investigated for being used for money laundering and financing of terrorism by AUSTRAC, and didn’t announce anything, kept putting out one pumping press release or speech after another, and then the three principals sold hundreds of millions of dollars of their stock, just before the bombshell hit.

I don’t know if they actually did anything illegal, but boy, that gives you zero trust in management and would make me avoid the stock no matter how tempting the story is. Just how I see it. There are cleaner stories and more trustworthy managements out there.

Saul

Australian Transaction Reports and Analysis Centre (AUSTRAC) is an Australian government financial intelligence agency set up to monitor financial transactions to identify money laundering, organised crime, tax evasion, welfare fraud and terrorism.— Wikipedia

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I sold out of my APT after seeing the announcement regarding Austrac (Regulator) audit and their view that APT is in non-compliance with AML and before the timing issue coming out.

If more comprehensive customer onboarding comes through, the application of the money laundering rules will be a real handbrake on customer growth. My understanding is that millennials signing up are put through a painless and quick account opening process which is entirely different to the hurdles you jump through to open an AML compliant bank account or brokerage account.

I will watch on the side-lines as I think more pain to come as this audit process is undertaken over coming months.

Also the tone of the spin the company put on the regulatory action disclosure compared to the reading the regulators letter were contrasting and concerning to me.

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I am not very concerned about the regulatory issue here, but I think Saul and Kiwi18 hit the nail on the head with their concerns about management. Despite this company’s incredible growth and market opportunity, that concern led me to sell my position when news of the insider sales became public.

I will probably redeploy the proceeds into ALU, WTC (thank you Sean), possibly a new Joe Magyer recommendation (his Lakehouse Capital monthly newsletters are publicly available and easily found using Google), and AYX.

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Its been a wild ride with Afterpay - their stock has risen 38% since the news broke of the anti-money laundering/counter terrorism audit on June 17, with an all time high now in spitting distance.

Looking forward to their full year financial results which will be released mid August.

And then it dropped 10% at the end of the day :slight_smile:

Jeff

And now back up 20%!!!

Re the original comment, the insider sales I presume relate to the capital raising, related to the sale of some of the founders and CEO’s stake, which were well publicised to the market. The founders still have a considerable stake in the business.

Also as per more recent releases, the market is happy that the founders are looking to make the board more independent with one stepping down from chairman to CEO, while the other will move to CRO. They will look to hire 2 new independent directors, who would then make up a majority. They have also recently hired Frerk-Malte Feller as COO, who comes from Facebook and has significant experience in growing financial online platforms.

As to the AUSTRAC audit re money-laundering and counter terrorism requirements compliance, this is not an ‘investigation’ into suspected dodginess. Here are the comments directly from the mouth of the CEO of Austrac:

AUSTRAC Chief Executive Officer, Nicole Rose PSM said the buy now, pay later sector has experienced rapid growth in recent years and this appointment reminds new financial services businesses that they have obligations under the AML/CTF Act and they must take these seriously.

“The audit will help identify if Afterpay has developed and implemented the systems and controls it needs to ensure it complies with its obligations. These laws are in place to protect businesses, the financial system and the Australian community from criminal threats,” Ms Rose said.

AUSTRAC is committed to educating emerging financial services businesses to assist them to meet their obligations and fight financial crime.

The audit will be used to determine the extent of any compliance issues and whether further regulatory action concerning Afterpay is required.

“AUSTRAC will continue to work with Afterpay to assist the company to mature and strengthen its compliance processes, staff training and suspicious matter reporting,” Ms Rose said.

“But we will not hesitate to take action where an organisation is failing to appropriately protect itself and Australia’s financial system from criminal activity.”

The language is definitely aimed around shaping the sector for compliance, not coming down with a heavy fist. In addition, the comments re potential regulatory requirements have been a constant discussion around the BNPL sector and so far they have passed numerous hurdles avoiding more onerous requirements for credit checks.

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An update on Afterpay.

On November 11, 2019 Afterpay released a business update with the highlights below:

  1. Underlying sales up 110% yoy to $2.7 billion
  2. Active customers up 137% yoy to 6.1 million. Onboarding 15 000 new customers per day. US customers now 2.6 million - UP 50% since June 30, 2019!
  3. Active merchants up 96% yoy to approx. 40 000.
  4. FY15-17 customers use afterpay 22x per annum. FY18 and FY19 cohorts purchase 14x and 7x per annum respectively. Evidence spend per customer increases over time.

Strategic agreement with Mastercard in Australia and NZ. If is unclear what this entails at the moment, however, it is a sign Afterpay is disrupting the credit card space, forcing Mastercard to take notice.

Ebay has also reached an agreement with afterpay, and afterpay is expected to go live on Ebay in 2020. Ebay is the largest online deal in Afterpay’s history.

Board appointment announced, with the Introduction of Gary Briggs to the board. Gary is the former VP, CMO of Facebook, and is also on the board of Etsy. They are looking for additional board appointments to improve the board governance and oversight capabilities. The rapid growth is stretching the capabilities of the current board, and this looks to be a very prudent step.

On November 25, 2019, Afterpay announced the final, independent audit report has been released, and the report’s outcome is quite positive for Afterpay. The report has identified Afterpay as being low risk in relation to money laundering and terrorist financing activities, and that Afterpay’s current program is aligned with the AML/CTF Act.

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Sean - thanks for posting.

Agreed - the underlying fundamental performance is growing faster than any other holding I own (with the exception of Luckin Coffee in China which is growing at 557%).

Well I topped up twice since the AUSTRAC announcement.

If you think about it - APT is still more than 15% off from the recent highs and at the same time there has been both a fundamental valuation announcement (the results) as well as effectively 2 de-risking disclosures including: a business update outlining just how well the fundamentals are which are well ahead of expectations in US/UK and also the AUSTRAC report.

Just taking a step back APT should be materially improved in its valuation standing now than just a few weeks ago.

I can see significant near term catalysts with Black Friday Cyber Monday and Christmas shopping events and potential related announcements (Afterpay were not in UK this time last year and only just established in the US) ,together with news on new geographic expansions (financed by the recent private placement) as well as updates on Visa in the US and finally implementation of MC and Ebay in Australia.

This is now a 4% holding for me.
Ant

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http://schrts.co/TDxZdbQw should have been dumped on 1/23/19.

Quillnpenn - a poor church mouse scratching for a living as a Swing Trader.

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I believe they are discussing Afterpay Touch ASX:APT