Afterpay share price charges higher as regulatory risk subsides

The Afterpay Touch Group Ltd (ASX: APT) share price has charged 3.78% this morning as the threat of regulation appears to be waning

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Afterpay Touch Group Ltd (ASX: APT) share price has charged 3.78% this morning as the threat of regulation appears to be waning. At the time of writing, Afterpay shares were trading at $16.19 per share following this week's grilling of "buy now, pay later" chief executives from both Afterpay and rival Zip Co Ltd (ASX: Z1P).

Now boasting a market cap of $3.65 billion, the biggest risk to Afterpay's growth trajectory has always been the looming threat of regulation by the likes of ASIC if the company was deemed to be a credit provider. This latest Senate inquiry has been scrutinising the business model of Afterpay and its fellow competitors, and looking at options for further regulation in the "buy now, pay later" industry.

Afterpay strenuously denies that it is a credit provider, as its business model does not actually extend lines of credit to its customers. Instead, customers pay off their purchase in four equal instalments over a set period of time and are subject to pre-determined "late fees" rather than interest expenses seen on traditional credit products such as credit cards.

Afterpay saw stratospheric growth in 2018 as its share price exploded on the back of consistent outperformance on its sales numbers and a successful expansion into the USA. The share price closed the year out at $12.40, a 1-year increase of a tidy 94.36% for investors in one of the big success stories of 2018.

I think the tone from ASIC in the latest round of Senate hearings indicates the regulator may push for greater supervisory powers without restricting the current business model of Afterpay. This thesis is also supported by the corporate regulator's report just months ago that found that powers to intervene in the sector should be satisfactory rather than regulating Afterpay under the much more restrictive Consumer Credit Protection Act 2009.

Markets appear to be on the same wavelength in this regard, with this morning's early gains indicating that the upwards trajectory for Afterpay could be set to continue ahead of its mid-year results release in February.

Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Emotional euphoric young woman giving high five to male partner, celebrating family achievement, getting bank loan approval, or financial or investing success.
Share Gainers

Why Bowen Coal, Droneshield, Mesoblast, and St Barbara shares are racing higher today

These shares are ending the week positively. But why?

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Cettire, Digico, KMD, and WiseTech shares are falling today

These shares are out of form on Friday. But why?

Read more »

Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys right now.

Read more »

Broker Notes

Brokers say these ASX growth stocks are top buys

Analysts have good things to say about these shares this month.

Read more »

Share Market News

Bell Potter names 2 of the best ASX 300 stocks to buy in 2025

These could be best buys next year according to the broker.

Read more »

A man looking at his laptop and thinking.
Share Market News

5 things to watch on the ASX 200 on Friday

On Tuesday, the S&P/ASX 200 Index (ASX: XJO) went into the Christmas break with a small gain. The benchmark index rose 0.25%…

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Broker Notes

Invest $1,000 into Pilbara Minerals and these ASX 200 stocks

Analysts have named these shares as top picks for a $1,000 investment. Let's see why.

Read more »

Happy young couple saving money in piggy bank.
Opinions

Want to start investing in ASX shares? Here's what I'd buy

This is where I’d begin to put my money in the stock market.

Read more »