At time of writing, Afterpay Touch Group Ltd [ASX:APT] shares are trading at $15.79, which marks a 4.57% increase from yesterday’s trading price.
This is an admirable rise in its own merit for the tech-driven payment company. It’s also an impressive move when you compare it to the company’s share price earlier this week.
To the untrained eye, this spike has come out of nowhere. And even to the trained eye, it is tricky to spot its source.
Latest news for Afterpay
The most recent announcement on the ASX from the company was released on Wednesday 19 September, confirming the end of the offer period for their Share Purchase Plan.
This plan was announced back on 23 August. It was outlined in the accompanying booklet that shares in this plan would trade at a maximum of $17.05 each, and up to $15,000 worth could be purchased by participating shareholders. The actual trade price ended up being $16.96 per share, so a bit better than expected.
The aim was to raise $20 million to put towards the expansion of the company internationally. Interest has sparked in the US on Afterpay’s ‘buy now, pay later’ technology method. It has also been announced that Afterpay will move into the UK market.
At a quick glance, one would assume it’s this overseas interest that is spiking up investor interest, with people wanting to get a slice of the company before it really takes off and the share price skyrockets.
And yes, this is likely one piece of the puzzle. But it doesn’t explain why the rise has come today, of all days.
The after-effect of Afterpay’s Share Purchase Plan
This Share Purchase Plan received a lot more interest than Afterpay were anticipating. Applications totalled $36.8 million from more than 3,500 shareholders. This is well over the target of the $20 million they sought to raise.
So the company made the decision to ‘exercise discretion under the SPP terms’ and scale back the applications to $25 million, determined on a prorate basis.
This started happening early this week, right after the SPP closed. And judging by the downfall of share price following it, it looks like this scaling back was scaring away investors. And for good reason, for it suggested the company was ill-prepared for large investor interest.
As a result, Afterpay shares were trading as low as $15.10 yesterday afternoon. That’s $1.86 less than the SPP share price, or a 10.1% decrease.
It would appear that investors took that as a sign to buy in…
Yes, it seems those who didn’t make the cut, or missed out all together on receiving Afterpay SPP shares have scrambled to secure a chunk at this low price of $15.10.
And we’ve seen the effects of this rush of new investors today, with the 4.57% price leap.
By this logic, it may look like the price is going to continue to climb until it reaches that $16.96 figure again. Then it’s up to the company to reveal initiatives that will keep investor’s ears tuned in.
Check this space regularly to get the latest on this technological phenomenon.
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