The writing was on the wall when Affirm (NASDAQ: AFRM) announced the terms of its public debut. While the company may not be a household name, it’s the brainchild of Max Levchin, one of the co-founders of payment processing kingpin PayPal (NASDAQ: PYPL). The online lender provides financing and installment loans for customers on e-commerce sites.
After initially planning to price its shares between $33 and $38, strong investor interest pushed that range higher to $41 to $44 per share. On the eve of its debut, Affirm priced its shares above the high end of the range at $49. Even that wasn’t enough to dampen investor enthusiasm.
The company’s initial public offering (IPO) followed a pattern that played out repeatedly in late 2020, as investors snapped up shares at a dizzying rate. The stock began trading at roughly 12:20 p.m. EST at $90.90, nearly 86% above the offering price, and never looked back. The stock ended the day at $97.24, more than 98% above its offering price.
Affirm offered 24.6 million shares to investors. If the underwriters exercised their right to sell an additional 3.69 million shares, the offering might have raised as much as $1.38 billion, valuing the company at about $23 billion.
For the fiscal year ended June 30, 2020, Affirm reported revenue of roughly $509 million, up 92% year over year. At the same time, the company was able to reduce its net loss to $113 million, a slight improvement from a loss of $120 million in the prior year. Affirm’s growth accelerated going into the first three months of fiscal 2020, with revenue that grew 98% year over year to $174 million. The company pared its red ink by half, with a net loss of $15 million, down from $31 million in the prior-year quarter.
It’s important to note that that Peloton Interactive (NASDAQ: PTON) is Affirm’s biggest customer, representing 30% of its revenue in the most recent quarter.
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Danny Vena owns shares of PayPal Holdings and has the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool owns shares of and recommends PayPal Holdings and Peloton Interactive and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.