Tencent - one of the world’s largest tech firms (owners of WeChat and WeChatPay as well as numerous eCommerce and online Media and Gaming platforms with over 1Bn transactions per day in China), has taken a 5% stake in Afterpay.
Interestingly this was done between $17-$31 (AUS), so i) offering substantial confidence and support in the business at the current valuation level ii) at 5% has purpose - with the welcome notice clearly referring to potential collaboration and expansion as a “strategic investor”.
Afterpay: “To be able to tap into Tencent’s vast experience and network is valuable, as is the potential to collaborate in areas such as technology, geographic expansion and future payment options on the Afterpay platform.”
Tencent: "We look forward to a deep and long-term business partnership between Tencent and Afterpay.”
Following on from this it is it can also be revealed that Afterpay has applied for its Trademarks in China…
http://www.chinatrademarkoffice.com/searchtm (just run a search for Afterpay)
There is a dissection of the implications of this deal here:
Five ways Afterpay can win from Tencent
The ability for both parties to share insights around technology and models is probably the lowest hanging fruit here.
it gives the group a potential path into China, where, as Molnar says, a strategic partner is essential.While Afterpay’s focus on English-speaking markets is understandable and, at this stage at least, has been relatively successful, the opportunity in China is huge. Citi’s Ahmed sites McKinsey numbers that put the size of the online retail market at $US1.5 trillion ($2.3 trillion) or about two-and-a-half times the size of the US market.
Tencent could be a potential source of funding for Afterpay, which needs to keep finding capital as it grows its business…
Tencent could eventually swallow Afterpay whole. Ahmed sees a takeover as unlikely in the short-term, … as Sotiriou points out, Afterpay has some form of alliance with Visa, Mastercard, eBay, and now Tencent. If the ultimate play is for a big player to take Afterpay out once it reaches a point of critical mass, then at least the Australian group is on the radars of serious global players.
is what it does for its share price. It’s not so much that the stock will sky-rocket from here – after all, Afterpay’s shares had jumped 227 per cent to $29.16 since hitting a low of $8.90 on March 23…in the words of Morgan Stanley analyst Andrei Stadnik, this “likely helps to stabilise the share price, which has seen increasing volatility given market concerns on credit losses and potential weakness in consumer discretionary sales”.