The Ticker
What Investors See in Affirm, the First Big Tech IPO of 2021
What you need to know about the buy-now-pay-later startup founded by PayPal veteran Max Levchin that went public today
Welcome to The Ticker, a series that examines everything you need to know about companies going public.
Today, Affirm will discover the value of patience.
Originally slated to go public in late 2020, Affirm, the financial services company created by PayPal co-founder Max Levchin that lets customers “buy now, pay later,” pushed its IPO to the new year. That decision was said to have been heavily influenced by the scorching debuts enjoyed by DoorDash and Airbnb, which saw both companies end their first day of trading markedly above projected prices. Although neither of those firms is complaining about how their IPOs performed, Affirm’s leadership seems to have taken the position that given the market’s enthusiasm, going public at their original price would amount to leaving money on the table. The company recently revised its price range in an updated SEC filing (from $33–$38 to $41–$44), and was reported late yesterday to have raised that to $49 a share, which would value the company at close to $12 billion. With its debut on the Nasdaq today under the ticker AFRM, here are three reasons Affirm is poised to succeed and one reason it might struggle.
A simple consumer experience
At its core, Affirm provides a straightforward, consumer-friendly value proposition. Rather than paying for an item’s full cost at the point of sale, customers can use Affirm to split their purchase into installments. In some cases, such installments are offered free of interest, meaning that consumers bear no added cost for leveraging Affirm’s service. This is the case with Affirm’s much-publicized agreement with Peloton, a deal that accounts for 20% of Affirm’s revenue.
In such instances, using Affirm is a no-brainer for consumers. Why pay the full-price upfront when you could amortize it over time? (One counterargument: You lose out on credit card points.) Even in cases in which Affirm does charge interest, ranging between 0%–30% APR, rates are often favorable…
