Any newbie or swing trader hoping there will be TO announcements in few weeks might be due for reality checking. If you read the APT and SQ story, it was a partnership of few years that made square realise the importance of BNPL and eventually that paved the way for historical deal because they like what they saw , in terms of referrals, customers engagement and so on. As much as I want deal to happen sooner, but i'm well aware of the fact that that may not be the case.
We are all aware, Klarna & Tencents, have been subject of rumours recently, wherein first one has been validated as strategic investor making us all think " Klarna might be the one", but its Founder interview created doubt in my mind when he was asked about Square deal suggesting he was surprised regarding the timing of it as he never expected MA activity this early in the sector, he was thinking around 1-2 years timeframe. He also emphasised the organic growth and suggested Klarna have done MA in the past and he knows how difficult it is to figure out synergies between two. If you see their MA history, they haven't done big acquisitions, just number of small value deals around €150M . It kind of suggest
founders existing psychology and thoughts regarding TO. However, on the other hand he and his board might change the strategy and speed up the process to tackle competitive threat. I'm quiet excited to read their upcoming Annual reports to figure out if there is any changes in strategic directions.
When we expect too much, we root ourselves for disappointment and it taints the reality. ZIP quarterly results was good but people got spooked with arrears and bad debts and every one of us were fed with Apple-Paypal doom gloom story and it just added fuel on fire. While doing so, they didn't care about Stripe and Adyen partnership. Nobody even cared about this or even gave any value at all. But if Quad pay is bringing more customers to merchants, there is higher engagements and referrals via Quadpay then Strip and Adyen would see the strategic importance of this company and will follow Square footsteps to seal the deal as well. When Larry says his mission is to be strip of BNPL sector, he is serious about that. As an investor, I'd prefer to have merger deal with Stripe than Klarna. But some of the BNPL pundits , hold the view that Afterpay was best in class so got that deal however we cannot expect same with ZIP, and some of the investors just praying for TO to get out of their positions and some might say it's only getting worse for 2nd Tier BNPL companies so beggars cannot be choosers , they ought to merge otherwise they will disappear. Thus, to all the holders, look ahead and take big picture. This sector is thriving and its a biggest threat to trillion dollar credit card industry. ZIP is undervalued not just because of shorter but also Australian industry experts assigning lower valuations to its business model compared to afterpay however in US market, as per Peter Gray, the business model was highly appreciated during wells Fargo US roadshow. Therefore valuations will eventually catch up with business performance, its just a question of when? which is very significant yet difficult to answer. One short term catalyst will be rebrand followed by Global partnerships announcements. However, shorter have been emphasising bad debts and losses narrative and competitive environment for some time now with latter losing some stems but still they will continue to talk losses and bad debts leading up to August results . Just Beware and take bigger picture.
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