What will happen when Afterpay shares convert into Square stock?
The post What will happen to Afterpay (ASX:APT) shares following the Square acquisition? appeared first on The Motley Fool Australia. –
The Square-Afterpay deal
As mentioned here, the two parties have agreed an all-scrip deal. This deal will see Afterpay shareholders receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay share they own on the record date.
Based on the latest Square share price of US$247.26, this implies a transaction price of approximately $126.21 per Afterpay share. This values the deal at approximately US$29 billion or A$39 billion.
What will happen to your Afterpay shares following the acquisition?
Given that Square’s offer is all-scrip and not cash, shareholders may be wondering what will happen to their Afterpay shares if the acquisition completes successfully.
The good news is that Square is aiming to make the process as painless as possible. So much so, it plans to give shareholders two options post-completion.
The first option is for shareholders to receive the consideration in NYSE-listed Square stock. For investors that already invest directly in the United States, then this would be a possible option for them.
However, not everyone invests directly in the United States. So, for them, Square intends to establish a secondary listing on the Australian share market. This will allow Afterpay shareholders to trade Square shares via CHESS Depositary Interests (CDIs) on the ASX. This is the same way that Australian investors buy and sell ResMed CDI (ASX: RMD) shares at present.
What about tax?
The good news is that if all goes to plan, there will be no capital gains tax for shareholders to pay when Afterpay shares are converted into Square shares.
Afterpay advised that it will apply for a ruling from the Australian Taxation Office in relation to the availability of scrip-for-scrip capital gains tax rollover relief.
It notes that the stock transaction is intended to be tax-free for Afterpay shareholders in Australia. As such, the receipt of confirmation of such a ruling is a condition precedent to the transaction.
Should you invest $1,000 in Afterpay right now?
Before you consider Afterpay, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Afterpay wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of May 24th 2021
All about Square, the US company acquiring Afterpay (ASX: APT) shares
Afterpay (ASX:APT) share price up 29% after takeover & FY 2021 update
ASX 200 Weekly Wrap: ASX grinds to a halt following new all-time high
Afterpay (ASX:APT) to be acquired by Square for $39bn
These were the worst performing ASX 200 shares in July
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.