Shopify earns $ 2 billion with Affirm IPO, six months after the collaboration

Shopify has just come out of a year of huge growth, as the Covid-19 pandemic drove massive growth in online shopping. It now begins 2021 with an explosion thanks to an 8% stake in Affirm, the first technology IPO of the year.

Both companies have seen their businesses explode since early last year, when Covid-19 forced physical retailers to close, giving consumers an even greater incentive to shop online.

Shopify’s stock price nearly tripled in 2020 value as retail chains, restaurants and grocery stores turned to their software to create fast web storefronts, manage payments and keep their businesses afloat. in operation. Its market capitalization has exceeded $ 140 billion. Affirm, founded in 2012, partners with retailers to offer consumer loans, allowing shoppers to pay for items such as Peloton bikes, Dyson vacuum cleaners and Oscar de la Renta handbags.

The two companies forged a partnership in July for online lender Affirm to become the exclusive provider or financing point of sale for Shop Pay, Shopify’s buying service. As part of the deal, Shopify was granted guarantees to buy up to 20.3 million shares of Affirm.

With Affirm’s debut on the Nasdaq on Wednesday, Shopify’s stake is worth about $ 1.9 billion. Affirm jumped 98% to $ 96.84 in the early afternoon in New York.

With the partnership, Affirm became the provider of Shopify’s new “buy now, pay later” financing service, called Shop Pay Installments, which was launched for some U.S. merchants later this year. past.

Affirm said in its brochure that the Shopify deal allowed it to “significantly expand the number of merchants and consumers on our platform”. Shopify serves more than a million companies and said in October that gross third-quarter merchandise volume doubled from a year earlier to $ 30.9 billion.

At the time of the announcement, CEO and founder Max Levchin told CNBC that Shopify and Affirm will have a “closely integrated partnership” that allows retailers to “make a change” for the product to launch.

“We expect a massive uptake,” Levchin said in the interview. “By facilitating integration, we expect it to be very close to total ubiquity.”

The diversification of merchants provided by Shopify is important to Affirm, which accounted for Peloton for 30% of revenue in the last period.

But accessing Shopify’s expansive customer base came at a high cost: Affirm gave Shopify the right to buy more than 20 million shares for a penny. A quarter of the shares issued in the original mandate were acquired in July. The remaining 15.2 million relied on the IPO.

Shopify is Affirm’s third largest shareholder. The sole largest owners are founder and CEO Max Levchin, who has an 11% stake worth $ 2.7 billion, making him the last member of the so-called “PayPal mafia” he came to be billionaire and Jasmine Ventures, which is part of Singapore’s sovereign wealth. finances GIC and has 9%.

The next major holders are Lightspeed Venture Partners, Peter Thiel’s Founders Fund and Khosla Ventures.

Shares of Shopify traded slightly on Wednesday, trading at $ 1,188.73.

I’LL SEE: Affirm Shopify Partners for “Shop Pay” Quotes