The phenomenal success of Afterpay is a story of shrewd wheeling and dealing combined with winning over regulators, according to one of the authors of a new book on the company.
Australia’s fintech unicorn made global headlines recently when Jack Dorsey’s Square group (those guys that make those squares that you tap to pay for your market stall gozleme) announced they would be acquiring the Aussie buy-now, pay-later giant for $39 billion. The buyout has been hailed as a pivotal moment for Australian tech companies and represents the country’s largest ever corporate takeover.
“There’s no doubt that they played a very, very skilful game,” said Jonathan Shapiro, a senior business reporter at the Australian Financial Review, who has followed Afterpay’s meteoric rise from the very start.
“It was a very do-or-die dollar game for them, you know, they could have been nipped in the bud, near the beginning, and this thing wouldn’t have flourished.
“So they had to get hard to play hard, you know, in the lobby in front of the head to be very skilful. They had to recruit lobbyists, they had to tell their story really well.”
[It] makes it perhaps the most interesting company that has probably ever been on the Australian market.
Shapiro has just published a new book along with his colleague James Eyers titled Buy Now, Pay Later, the Extraordinary Story of Afterpay that details the bewildering five-year journey that the Afterpay team took to reach the point they find themselves at today – with both co-founders now multi-billionaires.
It turns out that all it takes to create a $39 billion company is a bit of start-up capital, a great idea, some luck, endurance and a small army of lobbyists and politicians to swing the scales of regulation in your favour. Like with all great tech companies making money is optional.
In their book, Shapiro and Eyers chronicle the political manoeuvring of the Afterpay board to sway key decisions and inquiries their way in order to avoid being regulated as creditors.
Part of those tactics included the use of stock options (like IOU coupons that give holders the right to sell a certain stock at a later date and price) to lure key influencers in their favour.
Shapiro told Central News: “Think about it, imagine I came to you and you were a blogger, let’s just say you’re a very good blogger, a young guy with a big following.
“And they say, we really value your voice, we’d love to get to know you better and invite you for coffee.
“Then they say, look, we’d like to bring you on as an advisor to our company to help our product be better?
“Here are some stock options for your help, nothing major maybe 20c or so.
“Commonwealth Bank wouldn’t do that. Because their share price isn’t going to go up by 10 times in a year. Whereas stock options in a fast growing company can be very valuable bargaining chips.”
Afterpay stock is currently priced at around $130, in February of last year its share price sat at around $9.
Longtime critics of Afterpay believed their prophecies had finally come true – only for the company to make a remarkable recovery thanks to a pandemic-induced online shopping spree. For Shapiro, the controversial success-against-all-odds nature of the Afterpay story is what made it so compelling in the first place.
“James and I have been covering it, almost from the beginning,” he said. “And every time it’s come up; it’s been like a real kind of visceral debate, you know, very binary, with people sitting very firmly on one side.
Some consumer finance guys called it a gateway drug to hook young people into debt.
“Opposition and support came from all different levels. On the sharemarket; people totally disagreed, some calling it an unprofitable lender, others saying it’s the best tech company we’d ever seen.
“Some consumer finance guys called it a gateway drug to hook young people into debt. While others saw it as the answer to credit cards.
“It’s all of this binary discourse that makes it perhaps the most interesting company that has probably ever been on the Australian market.”
For now at least, following this latest successful landmark sale – and having won the right to self regulate, it would appear as Shapiro and James eloquently put it in their book that: “Politically, Afterpay has once again prevailed.”
Main image of AFR journalists and authors of Buy Now Pay Later book, James Eyers and Jonathan Shapiro. Photo Louie Douvis/supplied