This morning Affirm, the buy-now-pay-later financing startup, raised its IPO price range to $41 to $44 per share, up from a previous range of $33 to $38 per share.
The sharp repricing is steep in percentage terms, with the bottom end of Affirm’s range rising a little more than 24% and the top end gaining a smaller 16%.
For Affirm, the news means a larger IPO fundraising haul and a confirmation from public investors that its model, its economics, its business performance and its relationship with Peloton are incredibly valuable.
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As TechCrunch wrote when Affirm first affixed a price range to its IPO, the fintech unicorn will be worth a multiple of its final private price. The company was valued at around $2.9 billion in a 2019 round and raised more capital at a higher $19.93 per-share price in September of 2020; the company’s IPO price range is now more than double what the company was worth less than half a year ago.
Let’s calculate Affirm’s new simple and diluted new valuation ranges, and contrast those with its recent revenues to get a handle regarding how close to software numbers the startup can get its revenue multiple.
Inside the math
Very little has changed in Affirm’s S-1 filings when it comes to share counts. Today’s new S-1/A filing does include a note concerning around 18,824 shares, but past that it appears that most things are holding steady.
Apart from price, as noted. Skipping the roughly 18,000 share discrepancy as I am not sure if we should include it in our fully diluted share count, let’s do new valuation math for Affirm.
Using a simple share count, counting only shares that are expected to be outstanding after the IPO:
- Affirm shares outstanding post-IPO, including its underwriters’ option: 246,436,771.
- Affirm IPO price interval: $41 to $44.
- Affirm simple IPO valuation range: $10.1 billion to $10.8 billion.
Using a fully diluted share count, counting shares that could be created as the underlying options or RSUs related to their existence have vested:
- Affirm fully diluted shares outstanding post-IPO, including its underwriters’ option: 318,865,246.
- Affirm IPO price interval: $41 to $44.
- Affirm fully diluted IPO valuation range: $13.1 billion to $14 billion.
Hot damn, those are big numbers. Less than two years ago Affirm was worth $2.9 billion, now it could be worth as much as $14 billion, depending on how you count.
The company’s $500 million Series G looks suspect, however. Why was Affirm so poorly priced by its private investors? Raising a half-billion at a per-share price of just under $20 in September of 2020 when the company is being valued as much as $44 per share in January of 2021 makes it appear that the company’s private backers are making off like art thieves in a B movie.
Regardless of who is really mispricing IPOs, Affirm’s new numbers are indicative of a hot IPO market, reminiscent at least of what we saw in the closing days of 2020. If 2021 manages some huge first-day IPO pops, we can be even more confident in our read of the public-offering window. Early signs are looking good.
Now to revenue multiples. Using its Q3 2020 revenue to set an annualized pace, Affirm’s top line weighed in at $695.9 million at the end of the September period. At the lowest end of its new valuation ranges, Affirm is worth 14.5x its now-dated revenue pace. At the top end of its ranges, that figure rises to 20.2x.
Those are software numbers. For a fintech company that does not sport software-like margins. Sure, it’s growing, but I wonder if the same “it can grow into it” perspective that seems to have infected private-market valuations is not now fully in play when it comes to the IPO market.
One last thing. Per Affirm’s latest S-1/A filing, it could raise more than $1 billion in its debut. That’s a lot of money.