Wall Street has officially kicked off the 2021 initial public offering season.
The consumer lender Affirm debuted this Wednesday (Jan 13) as a public firm after raising $1.2 billion the day before.
It’s the first significant U.S. listing so far in 2021.
The company, which in December postponed its IPO, initially set a target price range of between $33 and $38 per share, and Monday raised it to a range of $41 to $44 per share.
The price ended up above the expected range, at $49 per share, getting an $11.9 billion valuation based on common stock outstanding and around a $15 billion valuation on a fully-diluted basis.
According to data from Pitchbook, it’s five times the valuation of about $3 billion at the time of Affirm’s second last private fundraiser in April 2019.
As soon it started trading this Wednesday, the stock more than doubled, ending the day 98.45% up, at $97.24.
Focused on Millenials
Affirm CEO Max Levchin co-founded the company in 2012 to offer easily accessible financing that is paid back in monthly installments. The idea advertised is “buy now, pay later,” and the main target is young online shoppers.
Affirm informed in its filing that more than 6.2 million consumers have completed approximately 17.3 million transactions with over 6,500 merchants on its platform as of September last year.
Affirm makes most of its revenues from fees it charges to merchants, with most customers paying zero interest. It doesn’t charge late fees.
The fintech generated $174 million from July to September 2020, up 98% from the same period in the previous year. Its net losses narrowed to $15.3 million compared with $30.7 million.
The company reported net losses of $113 million on revenues of $510 million in the 12 months ended in June, shrinking from losses of $121 million on $264 million of revenue in the previous fiscal year.
It’s facing growing competition from foreign firms, like the Australian Afterpay and the Swedish Klarna, as well as PayPal.
One risk to consider is that one single retailer – the at-home fitness company Peloton – represents about 30% of Affirm’s total revenue.
Affirm CEO is a prolific investor in startups. After PayPal was sold to eBay in 2002, Levchin, 45, started social application company Slide, which he sold to Google in 2010 for a reported $182 million.
He was also the first investor in Yelp, co-founded by fellow ex-PayPal executive Jeremy Stoppelman, and was its chairman until 2015. He was part of Yahoo’s board for three years as well.
Owning about 11% of Affirm total shares outstanding, Levchin now joins Elon Musk, Peter Thiel, and Reid Hoffman on the billionaires list, becoming the latest member of the so-called “PayPal Mafia,” which is a group of former PayPal employees and founders who have since founded other well-succeed tech companies.
Intense 2021 Expected
Affirm offering is a clear sign that investors’ appetites continue strong in 2021.
Several other companies are set to go public this week. The online marketplace Poshmark, the pet supply retailer Petco, the mobile game developer Playtika, and the auto service supply company Driven Brands are some of them.
Last year was the strongest IPO market in over two decades. In 2020, 454 offerings raised $167.2 billion in U.S. exchanges, compared with the previous record of $107.9 billion in 1999, amid the dot-com boom, according to Dealogic.
It was also a global frenzy. Companies raised more money through stock market listings in 2020 than in any year besides 2007: about $300 billion.