Afterpay shares shot up by almost 36% during early trade after it had unveiled Tencent Holdings as a shareholder, at the end of the previous week, with several investors supporting the idea of the buy-now-pay-later platform’s probable expansion across Asia.
Apparently, within a few minutes of opening, the Australian firm witnessed an increase to A$39.59, which is not far away from its all-time high $41.14 that it reached in February. Various analysts stated that the social media and Chinese gaming giant is capable of aiding Afterpay into expanding in Asia, which is still an uncharted region with a major amount of young population.
RBC stated that the big prize for the company would be its expansion, especially China, which is unarguably a key market. It would be tough for Afterpay to be entering China without having a strategic partner.
Nick Molnar and Anthony Eisen, the co-founders of Afterpay said that the firm will be working with Tencent on technology, future payment options and expansion of the Afterpay platform. Tencent had gradually built up a stake from March 27, according to filings done by Afterpay with the Australian Securities Exchange, with an increase of about 5% shareholding by April 30.
The stake build-up has set in after the sector, that endorses buy-now-pay-later has been facing challenges from the increasing rate of unemployment, resulting in fewer transactions as well as economic downturns on account of the coronavirus pandemic.
Afterpay had suffered from its worst month in March as several investors had dropped the stock over concerns regarding the economic fallout as a result of the pandemic amid the fastest growing space. The shares had fallen by close to a third form all-time high in the month of February.
The investors, however, have been assuming Tencent’s interest as an obvious sign of confidence in the long-term potential of the sector.