Why is this fund holding onto its Afterpay (ASX:APT) shares?

Hyperion’s Jason Orthman forecasts Square’s takeover will derisk Afterpay shares.
The post Why is this fund holding onto its Afterpay (ASX:APT) shares? appeared first on The Motley Fool Australia. –

Investment fund Hyperion initially worried about the $39 billion takeover offer posed to Afterpay Ltd (ASX: APT), but its concerns over the future of its shares have since eased. The fund’s now forecasting a bright future for the Afterpay share price.

The ASX-listed buy now, pay later (BNPL) giant is Hyperion’s largest investment in its Australian fund.

Fortunately, it also has a hold on shares in NYSE-listed Square Inc (NYSE: SQ), Afterpay’s likely future buyer.

Here’s why Hyperion is still excited about the future of Afterpay.

Why Hyperion’s still hyped over Afterpay

Hyperion still sees value in Afterpay shares despite the company’s plans to merge with Square.

Hyperion’s deputy chief investment officer and portfolio manager Jason Orthman spoke to Livewire, saying he expects Square’s takeover will derisk Afterpay shares.

Orthman commented that when he first heard wind of Square’s takeover, he was disappointed. But upon reading the terms of the takeover, he now believes the businesses will work well together and produce strong returns.

Additionally, Orthman said he is excited about the possibility of a secondary listing on the ASX, or an ASX-listed CHESS Depositary Interest for Square.

Livewire quoted Orthman as saying:

Afterpay shareholders shouldn’t be nervous about rolling into Square. It’s a huge win and a big deal for the Australian Stock Market to get a business of the calibre of Square onto the Exchange.

Orthman told the publication the two companies look likely to disrupt the traditional financial sector, particularly as Generation Z begins to enter the system. Therefore, he believes, the merger will likely future-proof both businesses.

He is also bullish on Afterpay shares because of the synergies between Afterpay and Square. Both are disrupting the financial industry and were beginning to lean into each other’s space.

Square’s interest in Afterpay stems from its desire to get into the BNPL sector. At the same time, Afterpay planned to wriggle into Square’s non-traditional banking space by launching Afterpay Money in October.

Orthman’s belief is the two companies will work better together, each filling gaps in the other’s business model.

Additionally, he said Square’s growth rate is higher than Afterpay’s. He thinks the takeover is a great opportunity to get a holding in Square.

Afterpay share price snapshot

The Afterpay share price is having another good day on the ASX today.

Right now, shares in the BNPL giant are swapping hands for $133.91 apiece. That’s almost 3% higher than their previous close.

The Afterpay share price has gained 13% so far this year. It is also 84% higher than it was this time last year.

The post Why is this fund holding onto its Afterpay (ASX:APT) shares? appeared first on The Motley Fool Australia.

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

More reading

Bank dividends to rise, and Climate Change in focus. Scott Phillips on Sky News First Edition

Could this company have a $1 trillion market cap one day?

Why we just sold all our Afterpay (ASX:APT) shares
Afterpay (ASX:APT) shares have been on Square’s radar for years
If you invested $1,000 in Afterpay (ASX:APT) shares 4 years ago, here’s what it would be worth now

Motley Fool contributor Brooke Cooper 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 and Square. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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