Coppo Report on APT .. Afterpay{7.17 0.13 1.85%} BUY
last night 5.5m shares in Afterpay shares were placed– placement price floor was $6.90 (with bids in 2c increments ) but due to strong insto demand - that saw the price covered at $6.90 then $6.92 & thus was then triggered at $6.94.
This line has been well talked about (about 2.5% of coy) with founders selling down.
This “overhang” was pushed by the “Shorts” & those brokers who were pushing it as a sell - as (one of the) reasons to be short!.
Now the issue for them was that they pushed this “Overhang” as one reason to sell/ short
only problem is that the share price was $5.50 at the time & now it’s back to $7.30, so it’s actually rallied +32% despite this perceived “overhang”..
The other factor that the shorts seems to completely miss was Afterpay going into the US.
I did hear a few who said it’ll be very hard to crack the US & some were doubtful - & others were so convinced that they were going to fail -m that they were wanting for a US launch announcement & they they were going to short the Cr%p out of it .. good luck !@ Your fellow shorts seem to have realised that is not really a great strategy - especially if this stock signs up multipe others
so the announcement the other day that their US launch has kicked off with an incredible first customer – the giant - Urban Outfitters Inc, which is one of the largest lifestyle fashion retailers in the US(Urban Outfitter’s annual sales are US$3bn, which …. Wait for it & this is not even a exaggeration --- is the same size as the total Australian online fashion market. Urban Outfitter’s has a minimum 2 year duration for up to 5 years.
Also – which was like a smack across the face of those (once happy) shorts - the rollout of positive announcements will continue all year – as they said APT has over 50 retailers who have signed contracts or term sheets to use Afterpay in the US ( now this is Aust retailers selling into the US BUT also US based retailers as well – so they are going a lot wider a lot quicker than anyone thought possible). These retailers include Cotton On, Lorna Jane, Morphe Cosmetics, Showpo, among others.
APT describes the market opportunity in the US as “substantial”, highlighting that the US online fashion market is 20 times the size of the Aussi mkt .. ie US$60bn, vs Australia US$3bn; and the US millennial market is ~63m, versus ~6m in Australia.
That announcement on the US again indicates we could be looking at a Top 100 ASX coy in the making-in the years to come. APT’s mkt cap is now $1.6billion & over time – if this US strategy works - could see its mkt cap at $5billion (or about $24 a share)– but we have a long way to go before we get there..
Shorts have “panicked” many of the shorts in Afterpay were the classic “me too” – in that many only shorted because they saw the short interest was increasing & thus thought that if others were shorting then they too would short & hopethe others knew what they were doing - clearly they didn’t..
The shorts as chart below shows was a one way move – up, from 1% in November to 4% in Feb & that accelerated to a record high of 9.86% on 7th May. Since then the shorts have been scrambling to cover.
The short interest has decreased from 9.86% back to 6.82% .. ouch …
Now unless some of the shorts were allowed to participate in last night’s placement (hopefully they were not) – then we have 6.82% of the coy short
That is
Shares that need to be covered (bought back) 14.8m shares –so now the line is done they will have to buy back (assuming they do – but some will remain short as they await to see if / how they are regulated)
APT Price at posting:
$7.17 Sentiment: Buy Disclosure: Held
