Shopify founder and CEO Tobi Lutke smiles after the company’s initial public offering on the New York Stock Exchange on May 21, 2015.
Lucas Jackson | Reuters
As the Covid-19 pandemic has stimulated massive growth in online shopping, Shopify has just passed a huge year of growth. Now, thanks to Affirm’s 8% stake, this is the beginning of 2021
Since Covid-19 forced physical retailers to close at the beginning of last year, both companies have seen explosive growth in their businesses, which has given consumers more motivation to shop online.
Shopify’s stock price has almost tripled in value in 2020, as retail chains, restaurants, and grocery stores have turned to its software to create fast online storefronts, manage payments, and keep businesses running. Its market value has exceeded 140 billion US dollars. Founded in 2012, Affirm cooperates with retailers to provide consumer loans so that buyers can purchase Peloton bicycles, Dyson vacuum cleaners and Oscar de la Renta handbags in installments.
The two companies formed a partnership in July to enable online lender Affirm to become the exclusive provider or point of sale financing for Shopify’s checkout service, Shop Pay. As part of the transaction, Shopify was awarded a warrant to purchase up to 20.3 million Affirm shares.
With Affirm’s debut on the Nasdaq market, Shopify’s shares are valued at approximately $1.9 billion. As of the afternoon in New York, Affirm rose 98% to 96.84 US dollars.
Through the partnership, Affirm became the provider of Shopify’s new “Buy Now, Pay Later” financing service, called Shop Pay installment payment, which was launched in the second half of last year for certain US merchants.
Affirm stated in its prospectus that the deal with Shopify allows it to “significantly expand the number of merchants and consumers on our platform.” Shopify provides services to more than one million businesses and said in October that total merchandise sales in the third quarter more than doubled from the same period last year to $30.9 billion.
When announcing the news, CEO and founder Max Levchin told CNBC that Shopify and Affirm will establish a “tightly integrated partnership” that allows merchants to “flip the switch” to put the product into use.
Levchin said in an interview: “We want to ingest a lot.” “By making integration so simple, we hope it will be very close to overall popularity.”
The diversification of merchants provided by Shopify is very important to Affirm, which relies on Peloton to account for 30% of its revenue in recent periods.
But the cost of acquiring Shopify’s large customer base is a high price-Affirm gives Shopify the right to purchase more than 20 million shares at a price of 1 cent per share. A quarter of the shares issued by the original warrants belonged to July. The remaining 15.2 million is attributable to the IPO.
Shopify is Affirm’s third largest shareholder. The only major shareholder is the founder and CEO Max Levchin, who owns 11% of the shares and is valued at $2.7 billion, which makes him the so-called “PayPal Mafia” who has become a billionaire The newest member of GIC, as well as Jasmine Ventures, which is part of Singapore’s sovereign wealth to fund GIC and owns 9% of the shares.
Followed by Lightspeed Venture Partners, Peter Thiel’s Founders Fund and Khosla Ventures.
Shopify’s stock price was almost unchanged on Wednesday, trading at $1,188.73.
Look: Confirm with Shopify partners to provide “store payment” installment payment service