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Here's Why Square Stock Soared Today

By Joe Tenebruso – Aug 2, 2021 at 5:57PM

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The digital-payments titan announced a game-changing acquisition.

What happened 

Shares of Square (NYSE: SQ) jumped 10% on Monday, after the fintech giant struck a deal to acquire Australian installment payments leader Afterpay (OTC: AFTP.F). 

So what

Afterpay is a leading provider of "buy now, pay later" services used by over 16 million consumers and nearly 100,000 merchants worldwide. The deal values Afterpay at about $29 billion, a roughly 30% premium to its closing price on Friday.

A king chess piece surrounded by pawns from both sides.

Square and Afterpay want to join forces. Image source: Getty Images.

The transaction is expected to close in the first quarter of 2022, pending regulatory and shareholder approval.

"Square and Afterpay have a shared purpose," Square CEO Jack Dorsey said in a press release. "We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles."

Now what 

Square says Afterpay could help to tie its seller and Cash App businesses closer together. Square wants to roll out Afterpay's installment services to even its smallest merchant customers, while also giving Afterpay's consumers the option to make payments directly in Cash App.

Installment payments have proved popular during the pandemic, particularly among younger shoppers. Merchants, in turn, see offering these payment options as a way to boost sales.

Square's seller and Cash App platforms are already thriving. The company released its second-quarter results alongside its acquisition announcement. Gross profit in Square's seller and Cash App segments surged 85% and 94%, respectively, to $585 million and $546 million. That helped Square's net income improve to $204 million, compared to a loss of $11 million in the year-ago quarter. 

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Square and AFTERPAY T FPO. The Motley Fool has a disclosure policy.

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