Company makes lending products that let people make online purchases in installments
Affirm Holdings Inc. shares have nearly doubled in midday trading Wednesday after the financial-technology company made its public debut.
Shares of Affirm AFRM, +98.45% opened at $90.90 Wednesday after listing on the Nasdaq, with the first trade coming at 12:20 p.m. ET. The company priced its initial public offering at $49 a share late Tuesday, above an already raised range of $41 to $44 a share. Shares recently changed hands just shy of $98.
The company raised at least $1.2 billion through the offering. Underwriters have access to an overallotment of 3.7 million shares beyond the original 24.6 million shares that Affirm sold through its IPO. Affirm reportedly delayed its IPO from late last year given the big first-day stock moves for Airbnb Inc. ABNB, +5.72% and DoorDash Inc. DASH, +3.13%
Affirm, led by PayPal Holdings Inc. PYPL, +3.06% co-founder Max Levchin, offers payment options that let people make online purchases in installments. The company receives compensation from merchants when customers opt for one of Affirm’s lending options. Affirm has an interest-free “0% APR” offering as well as a “simple-interest” loan product through which it also gets paid on the consumer end of a transaction.
Levchin told MarketWatch that transparency in terms of how much consumers will ultimately be paying for a given purchase is becoming “a required feature and not a nice-to-have” among the generations that are currently “financially active” and the ones to follow.
“Revolving credit is a tool that’s not as useful as it is dangerous,” he said in an interview after trading began. Levchin predicted that the majority of established players would shift to simple-interest products over compounding ones.
The company’s biggest customer is Peloton Interactive Inc. PTON, +7.29%, which accounted for about 28% of Affirm’s revenue in its latest fiscal year that ended in June. Affirm saw revenue of $509.5 million during its last fiscal year, up from $264.4 million a year earlier. The company posted a net loss of $112.6 million, compared with a loss of $120.5 million in the year-prior period.
“The pandemic has created a favorable environment as more value-conscious shoppers are seeking ways to finance online purchases in a seamless manner,” MKM Partners analyst Rohit Kulkarni wrote in a pre-IPO note to clients.
Affirm works with bank partners who originate many of the company’s loans.
Levchin sees big opportunities ahead, arguing that we’re “still in the relatively early innings of what payments and money look like,” and calling the financial-services sector perhaps the largest in the world alongside energy. Affirm has been growing its merchant base, which now stands at over 650,000 brands, and the company has arrangements with businesses like Walmart Inc. WMT, -1.02% and David Yurman that incorporate in-store financing elements alongside online ones.
Another area holding potential is that of customer loyalty. “I’ve learned not to preannounce products the hard way,” Levchin said, though he noted that there’s “an enormous amount of opportunity in rewarding customers for bringing their money to the merchants they love.”
The offering comes as the Renaissance IPO ETF IPO, +0.87% has gained 22% over the past three months and as the S&P 500 SPX, +0.23% has risen 8.5% over the same span.