Affirm, a fintech unicorn known as a top Buy Now Pay Later consumer lender, announced earlier this month its confidential application with the SEC to go public. This comes after a report in July (from WSJ) broke the news that the company was speaking with Goldman Sachs about an IPO. Once the application is approved, Affirm can file a S-1 to enter public markets before the end of the year. With over 8 years since the company started and more than $1B in funding, the timing may be right in making a move.

The target valuation for Affirm? $10B is a realistic measure based on its funding levels and past valuations:

• $100 million debt line in late 2016;

• $200 million Series E in December of 2017;

• $300 million Series F in April of 2019 (at a $3B valuation);

• $500 million Series G in September of 2020;

Despite the current economic conditions, public markets are still considered warm for new IPOs in 2020. The 3rd quarter in particular had the highest activity with IPOs in the last 4 years, boosted by the latest trend of SPACs (special purpose acquisition company). Investors waiting on the sidelines for the next offering in high-growth firms would jump on the chance to buy Affirm.

In the global competitive landscape, the US leader is up against other well-known companies in AfterPay, Klarna, and Sezzle. These platforms have shown exponential growth in transaction volume (up to 1M daily), consumer clients, and merchant partners in the last year. Two of these unicorns (AfterPay and Sezzle) have already launched publicly outside of the US and serve as measuring sticks for new valuations. For AfterPay, its value dipped as low as $12 AUD per share in the last 12 months and stands above $60 AUD at the end of 2020. Sezzle went from $1 to $9 during the same time period. Another similar company in this sector, Synchrony is valued over $13B in the public markets.

The consumer appetite for spending has evolved towards these innovative models of installment payments without interest or added fees. With younger generations of millennials and Gen Z avoiding debt, Buy Now Pay Later models offer a great alternative. As e-commerce overtakes physical stores and customer traffic dwindles due to the pandemic, merchants globally have welcomed BNPL checkout options as a way to stay in business. Shopping cart volumes and repeat customers are other added benefits for both consumers and companies.

Regardless if its 2020 or 2021, Affirm’s eventual IPO will be a gauge for more US fintech firms with established growth and product market fit to consider a public filing. Bill.com (in a separate sector of business payments) has seen tremendous success in its first year stock price. Mature public fintech companies such as Square and PayPal have also outperformed other areas in the market in 2020. The timing makes sense for Affirm and other fintechs to continue the trend towards IPO. //

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