Afterpay Ltd (ASX: APT) shares have been rocketing higher ever since they listed on the ASX in June 2017.
The group's share price is up more than 876% since its first day of trade and 141.16% in 2019.
But how much is the company really worth, and is there still value in buying Afterpay shares?
Why Afterpay shares could be overvalued
One of the big success stories this year has been Afterpay's United States (US) expansion.
A strong start to its international expansion has boosted the Afterpay share price higher and the company is now valued at $7.5 billion.
However, an article published yesterday in the Australian Financial Review (AFR) suggests that valuation may not be as clear-cut as it seems.
Much of the group's share price value is in its future growth potential rather than current earnings. And a large part of this growth potential rests on its US expansion.
Afterpay leans on options to attract the top talent to its US operations. The options are on the group's unlisted subsidiary called Afterpay US Inc.
However, the article suggests that those options could convert into ordinary shares in Afterpay's ordinary ASX shares. The question then becomes how much will existing shareholders get diluted?
So while the Afterpay share price is soaring and shareholders are happy, there are 110 million shares on issue in Afterpay US Inc.
Afterpay responded by saying it is "unlikely that the exchange will be on a one-for-one basis" and has capped its ASX-listed shares for US employees at 21.8 million shares. That represents roughly an 8.3% or $640 million stake in the Aussie group.
Foolish takeaway
The Afterpay share price has been one of many to surge higher in 2019, but given the options news discussed above, when you're buying into Afterpay shares in 2020 it's worth considering just what shareholding you're actually buying.
Elsewhere in the buy now, pay later space, rival Zip Co Ltd (ASX: Z1P) has seen its share price triple this year as well, while OpenPay Ltd (ASX: OPY) had a disappointing IPO on Monday.
