What happened
Shares of digital payments company Square (SQ 2.85%) rose by more than 11% this week after it reported its second-quarter earnings and announced it would be acquiring Australian fintech company Afterpay (AFTP.F).
So what
Square reported diluted earnings per share of $0.40 in the quarter on total net revenue of $4.7 billion. EPS beat analysts' expectations handily, but revenue fell short of the consensus prediction by more than $300 million.
However, the real news that seemed to drive the stock this week was the announcement that Square plans to acquire Australian-based fintech Afterpay in an all-stock transaction valued at $29 billion. Afterpay is a buy now, pay later company that enables customers to obtain their purchases right away and pay for them in four interest-free installments.
Square said it plans to integrate Afterpay into its Square Seller community and Cash App, so small merchants can provide buy now, pay later options to their customers. It will also help merchants using Square gain more visibility among potential customers, the company said.
Image source: Getty Images.
Now what
Despite the hefty purchase price, Square CFO Amrita Ahuja noted on CNBC that Afterpay is one of the few companies that is growing at a similar pace to Square, and said Afterpay will actually be accretive to its already huge growth.
Afterpay will also help Square with its international expansion, giving the company a whole new set of customers to cross-sell its already successful products to, so investors seem to think the benefits of the deal justify its price.
