Could a dual listing drive the Afterpay (ASX:APT) share price higher? 

Afterpay Ltd (ASX: APT) has announced potential plans to list in the US market. Could this be a catalyst to drive the Afterpay share price?

| More on:
wondering about asx shares represented by woman surrounded by question marks

Image source: Getty Images

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

A dual listing could potentially be on the horizon for Afterpay Ltd (ASX: APT). Could this act as a catalyst to drive further gains for the Afterpay share price? 

What are the benefits of a dual listing? 

The main advantage of a dual listing is access to additional capital. This is why cash-hungry businesses such as Mesoblast Limited (ASX: MSB) and Piedmont Lithium Ltd (ASX: PLL) have successfully listed on both exchanges.

A dual listing also makes sense for companies that have operations in, or derive a significant proportion of their revenue from, the United States. In the case of Aussie biotech Mesoblast, the company's treatments must be reviewed by the US Food and Drug Administration (FDA) for approval. And for Piedmont Lithium, its flagship lithium project is located in North Carolina with initial offtake agreements signed with local companies such as Tesla.

With that in mind, it does make sense for Afterpay to explore the potential for a dual listing since the US market has become the largest contributor to its business. Furthermore, additional funding may be required to help fuel Afterpay's continued global growth. 

What about Zip's dual listing rumours?

If this is all sounding somewhat familiar, that's because a similar story was surrounding fellow buy now, pay later (BNPL) provider Zip Co Ltd (ASX: Z1P) earlier in the year. You may recall that Zip shares surged by as much as 20% on 8 February after rumours the company was exploring a potential dual listing in the US surfaced.

But the rise in the Zip share price has arguably been just a partial catch up against Afterpay's monster valuation. Zip shares trade at approximately 29 times FY20 revenue, while Afterpay's revenue multiple has ballooned to approximately 67. 

On 21 January, Zip co-founder Peter Gray told the Australian Financial Review that "even if you looked at us as a direct comparison to Sezzle, we would appear undervalued, and I think that one of the opportunities for us as we go to market this year is to bridge that valuation gap."

Why a dual listing might not appear as glossy as it seems 

It might be worth taking a closer look at an already listed US BNPL share to gain an understanding of the sentiment for and performance of the sector in a different market. 

Affirm Holdings Inc (NASDAQ: AFRM), for example, is one of the top three largest BNPL players in the United States. Affirm listed on the Nasdaq on 13 January 2021 at a listing price of US$39 with a market capitalisation of approximately US$10 billion. 

It was then off to the races, with Affirm shares surging as high as US$146.90 by mid-February for a 277% return.

But following a tech-led selloff in late February, Affirm shares have never been able to fully recover, let alone keep up with the Nasdaq. Its shares breached the $100 level by late February, then slid back to the $80 mark by early March and briefly touched a record low of $63.02 on Tuesday this week. At these levels, Affirm trades at an FY20 revenue multiple of approximately 33. 

As Affirm continues to grind around record lows, one could argue that the US market is not particularly excited about its own born and bred BNPL player. What this means for the Afterpay share price should the company's dual listing eventuate remains to be seen.

Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on BNPL shares

Woman looks amazed and shocked as she looks at her laptop.
Share Gainers

Guess how much $10,000 invested in Zip shares on 7 April is worth today!

The rebound in the Zip share price since 7 April has been nothing short of remarkable.

Read more »

Frustrated and shocked business woman reading bad news online from phone.
BNPL shares

Why is the Zip share price dropping today?

Let's see how this buy now pay later provider performed in April.

Read more »

A young woman smiles as she rides a zip line high above the trees.
BNPL shares

How Zip shares rebounded 45% from their 7 April lows to beat the ASX 200

Did you catch what happened with Zip shares in April?

Read more »

A young woman in a shop hands her credit card to the cashier.
BNPL shares

Up 41% in 3 weeks, should I buy Zip shares today?

Zip shares have been on a tear in April. Now what?

Read more »

A young woman smiles as she rides a zip line high above the trees.
BNPL shares

Zip share price rockets 15% on record cash earnings!

It’s a great day to own Zip shares today. Here’s why.

Read more »

A young woman in a shop hands her credit card to the cashier.
Share Gainers

Zip share price rockets 20% on $50 million buyback news

Zip shares are surging ahead of the company’s planned $50 million buyback.

Read more »

BNPL written on a smartphone.
BNPL shares

Down almost 40% this year, can Zip shares turn around?

Is it time to buy now or wait until later?

Read more »

A man looking at his laptop and thinking.
BNPL shares

Buy, hold, or sell: What's the verdict on Zip shares?

Time to buy the dip on Zip, or time to close the case for good?

Read more »