Shopify founder and Chief Executive Officer Tobi Lutke smiles after the company’s IPO on the New York Stock Exchange on May 21, 2015.
Lucas Jackson | Reuters
Shopify has just had a tremendous growth year as the Covid-19 pandemic triggered massive growth in online shopping. Now 2021 kicks off with a bang thanks to an 8% stake in Affirm, the first notable tech IPO of the year.
Both companies have seen their businesses explode since early last year, when Covid-19 forced brick-and-mortar retailers to close, adding even more incentive to consumers to shop online.
Shopify’s stock price nearly tripled in 2020 as retail chains, restaurants and supermarkets used the software to create fast online stores, manage payments and keep their businesses running. Its market cap has exceeded $ 140 billion. Founded in 2012, Affirm has partnered with retailers to offer consumer loans, allowing buyers to pay in installments for items like Peloton bikes, Dyson vacuum cleaners and Oscar de la Renta handbags.
The two companies teamed up in July for online lender Affirm to become the exclusive vendor or point of sale financing for Shop Pay, Shopify’s checkout service. As part of the deal, Shopify was given warrants to purchase up to 20.3 million shares in Affirm.
With Affirm’s Nasdaq debut on Wednesday, Shopify’s stake is worth about $ 1.9 billion. Affirm jumped 98% to $ 96.84 in the early afternoon in New York.
With the partnership, Affirm became the provider of Shopify’s new “Buy Now, Pay Later” financing service called Shop Pay Termments, which launched for some US merchants late last year.
Affirm said in its prospectus that the Shopify deal allowed “to significantly expand the number of merchants and consumers on our platform.” Shopify serves more than a million businesses and said in October that gross trading volume more than doubled in the third quarter from a year earlier to $ 30.9 billion.
At the time of the announcement, CEO and Founder Max Levchin told CNBC that Shopify and Affirm will have a “tightly integrated partnership” that will allow merchants to “flip a switch” to get the product live.
“We are expecting a massive take-up,” said Levchin in the interview. “By making the integration so simple, we expect it to be extremely close to total ubiquity.”
The diversification of merchants that Shopify offers is important to Affirm, which counted on Peloton for 30% of its revenue in recent times.
But getting access to Shopify’s extensive customer base came at a high cost – Affirm gave Shopify the right to buy more than 20 million shares for a penny each. A quarter of the shares issued in the original warrant vested in July. The remaining 15.2 million was definitely acquired upon the IPO.
Shopify is Affirm’s third largest shareholder. The only bigger owners are Founder and CEO Max Levchin, whose 11% stake is worth $ 2.7 billion, making him the latest member of the so-called ‘PayPal Mafia’ to become a billionaire, and Jasmine Ventures, which is part of Singapore’s sovereign wealth. fund GIC and owns 9%.
The next top holders are Lightspeed Venture Partners, Peter Thiel’s Founders Fund and Khosla Ventures.
Shares of Shopify had changed little on Wednesday, trading at $ 1,188.73.
WATCH: Confirm partners with Shopify to enable ‘Shop Pay’ installments