Misconceptions about Afterpay

Apologies if this was addressed earlier, but there appears to be 2 versions of the stock. One in USD traded OTC, and one in Australian dollars on the ASX. Is there any strong reason to buy one over the other? Or are they basically the same?

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fidelity offers the stock but it’s a $50 brokerage commission.

ETrade offeres the US version for $0 commission. I guess my question is really - any reason not to buy the US version vs. paying $50 for the Australian version? (Other than maybe higher volumes)

Anecdote: My millennial daughter, a successful Go-To-Market team leader for a multi-national company, says she and her friends use AfterPay when ordering multiple items online with the express intent of returning all merchandise except the one or two items they select to purchase. Such as shoes or clothing. They can buy it all for 25% down, try it all on at home, and then return unwanted merchandise within the time period between the initial and second payment. I am not much of an online shopper, but she says more sites are offering AfterPay as a payment option every day.

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ETrade offeres the US version for $0 commission. I guess my question is really - any reason not to buy the US version vs. paying $50 for the Australian version? (Other than maybe higher volumes)

The shares are the same thing. The difference is that there are millions of shares traded daily on the Australian exchange and hundreds, or a couple of thousands on the US pink sheets (however a day ago, in response to all our discussion, there were all of 34,000). Average volume is listed as 2,017 shares per day. That’s a tiny amount!

What does this mean?

First, there are very few shares available without you moving the market. Second: Wide spreads between bid and asked (For example, 2 cents in Australia between bid and asked and say, 50 cents on the pink sheets, and that’s just for a few shares available). Another third problem is that the pink sheets don’t always reflect the actual market. The real (Australian) price might be $25.60, but someone in the US put in an order for 3,000 shares on the pink sheets, which moved the market and got filled at $26.30 or $26.50 (because of lack of liquidity), so the subsequent US price will be listed at $26.30.

I guess the pink sheets will be okay and if you buy a very small amount of shares, but if it’s a larger amount, the pink sheets can cost you a lot more than the Australian commission would.

I hope this helps,

Saul

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Hi all,

I apologize is this is verging on off-topic. But I just picked up some Afterpay after Saul’s recent thread. I was already watching it after the initial discussion a couple months back. But the recent discussion, and this thread as well, convinced me to pick up a starter position. I bought on Fidelity using the AFTPF symbol (Thank you for including that Saul, I had been having trouble finding it!) and I paid the $50 commission. My rationale is this: If AFTPF grows like we all think it could, $50 is a small fee. I pay $0 commissions on all my other trades, and this commission I’ve already earned back in the 2 days I’ve held the stock. If I hold it for 5 years and it grows even half as much, heck a quarter as much as AYX has, I won’t care about $50 spent acquiring it!

Thank you Saul, for this continued discussion, and to the original poster who brought AFTPF to our attention to begin with!

Paul

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Anecdote: My millennial daughter, a successful Go-To-Market team leader for a multi-national company, says she and her friends use AfterPay when ordering multiple items online with the express intent of returning all merchandise except the one or two items they select to purchase. Such as shoes or clothing. They can buy it all for 25% down, try it all on at home, and then return unwanted merchandise within the time period between the initial and second payment. I am not much of an online shopper, but she says more sites are offering AfterPay as a payment option every day.

Can’t you do this with a credit card? You don’t pay the card until about a few weeks after the charge hits. But you can also earn rewards points. The interest rates are probably higher than late fees on After Pay but for someone responsible you would rarely if ever pay a fee or interest of any kind. With a card, you pay just once month so you don’t have to worry about forgetting that your bank account is going to be charged on some random day.

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IRdoc, you’re correct…and, the way these services are being pitched is by telling the customer that if they buy something with a credit card, and return it, it might take several days for the money to be refunded to the account (for those with low credit limits, that might be an issue). It might also be true that if a person buys something towards the end of the credit card billing cycle via credit card, it would show up more quickly on their bill than if they use Afterpay, thus reducing available credit. Perhaps Afterpay (and their competitors) are appealing to a different generation, a different mentality and app-loving customers. Afterpay has an app! That might hook some people for the convenience and cool-factor alone. I am not of that demographic and I don’t like buying anything via phone.

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I wanted buy a few AFTPF (OTC) shares at Schwab yesterday but learnt I could not do it online but have to speak to one of their brokers. The broker said the commission will be $75 as they have to place the order at the Australian exchange. Unless one is buying a lot of shares this is very costly.

Is there a way to buy 100 or 200 shares w/o incurring such relatively high charges?
(I hope this is not off-topic.)

Hi Alphab.
I bought mine through TDAmeritrade and the commission was less than $10.
That may be useful info or maybe not.
Cheers, PB.

I’ve bought it through TDA and they charge $4.95 (100 shares, maybe more if more shares?).

that’s the pink sheet on OTC where average volume is only thousands. i asked TDA for trading on ASX directly, here’s response:

“I spoke with our trade desk. Unfortunately, I have been informed that they do not have the capability to trade on the Australian exchange. I will research your question further to assure the response I received was accurate. If by chance we do have the capability, I will notify you immediately.”

Please take this personal discussion off-board. Thanks. What you do is unblock Post this Reply to the Boards, and click E-Mail this Reply to the Author. Thanks,
Saul

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Interesting article on APT https://www.afr.com/companies/financial-services/consumers-j…

“COSBOA chairman Mark McKenzie said forcing small businesses to cover the cost of buy now, pay later schemes “isn’t one that washes, and ultimately, we are forced to recover costs through changes in prices which the consumer bears. There is no free lunch here”…

The credit card companies argued to the RBA in the late 1990s that they helped merchants expand their businesses and brought incremental sales but the RBA was not convinced, and in 2001 allowed merchants to be able to levy a surcharge on card payments…

“Retailers will then surcharge to recover margins … [which] will totally undercut BNPL’s claim that consumers pay no fees or charges and consumers’ habits will adjust as with other changes in the payment market,”

“Given the significantly higher cost of providing BNPL services for merchants, if such customers were presented the true cost of using BNPL services, we believe it is likely many may choose alternate payment methods, which may present downside risk to our forecasts and valuation.”

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I considered student debt as a reason for younger folks to be credit adverse, but Afterpay’s primary markets are Australia and New Zealand. America does not have a monopoly on high student, but it’s way out in front of England/UK which comes in second place.

Currently US student debt stands at ~$1.2T. UK student debt (in USD) stands at ~$200B. I do not know how many loans are held in each region, so without further research it’s a bit hard to extrapolate those numbers to gain an understanding of the number of people with outstanding loans and what the average loan amount might be.

Nevertheless, I don’t think this is much of a factor with respect to Afterpay. If young people in other regions are not using credit student debt is most likely not an important factor.

Reference: https://www.valuecolleges.com/collegecosts/

In Australia, college students do not take out student loans, and pay off their “debt” via the tax system (i.e get taxed a 4-7% above the income tax rate to pay off student debt, which has an inflation adjusted interest rate of 0%). College degrees are also a lot less expensive in Australia. With nearly all Universities in Australia government funded.

So, student loans are not a factor in Australia at all…