Shopify earns $ 2 billion in Affirm IPO, six months after partnering

Shopify has just experienced a year of huge growth as the Covid-19 pandemic has spurred massive growth in online shopping. We are now off to a good start in 2021 with an 8% stake in Affirm, the first notable tech IPO of the year.

Both companies have seen their businesses explode since the start of last year, when Covid-19 forced physical retailers to close, further enticing consumers to buy online.

Shopify’s share price nearly tripled in value in 2020, as retail chains, restaurants, and grocery stores turned to its software to create quick web storefronts, manage payments, and run their businesses. companies. Its market capitalization has exceeded $ 140 billion. Affirm, founded in 2012, partners with retailers to offer consumer loans, allowing shoppers to pay for items like Peloton bikes, Dyson vacuums and Oscar de la Renta handbags in installments.

The two companies entered into a partnership in July for online lender Affirm to become the exclusive provider or point-of-sale financing for Shop Pay, Shopify’s payment service. As part of the deal, Shopify received warrants to purchase up to 20.3 million shares of Affirm.

With Affirm’s Nasdaq debut on Wednesday, Shopify’s stake is worth around $ 1.9 billion. Affirm jumped 98% to $ 96.84 in the early afternoon in New York.

Through this partnership, Affirm became the provider of Shopify’s new “Buy Now, Pay Later” financing service called Shop Pay Payments, which launched for select US merchants late last year.

Affirm said in its flyer that the Shopify deal allows it to “dramatically increase the number of merchants and consumers on our platform.” Shopify serves more than one million businesses and in October said the third quarter’s gross merchandise volume more than doubled 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 bring the product online.

“We expect mass adoption,” Levchin said in the interview. “By making integration so simple, we expect it to be extremely close to total ubiquity.”

The merchant diversification that Shopify offers is important to Affirm, which relied on Peloton for 30% of its revenue in the last period.

But accessing Shopify’s vast customer base has come at a cost – Affirm gave Shopify the right to buy over 20 million shares for a penny each. A quarter of the shares issued in the initial warrant were vested in July. The remaining 15.2 million was invested in the IPO.

Shopify is Affirm’s third largest shareholder. The only big 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. GIC fund and owns 9%.

The next main holders are Lightspeed Venture Partners, Peter Thiel’s Founders Fund and Khosla Ventures.

Shopify shares were little changed on Wednesday, trading at $ 1,188.73.

WATCH: Confirm your partners with Shopify to make ‘Shop Pay’ payments