Although it is now 2 weeks to the day that Afterpay Ltd (ASX: APT) announced it has tentatively accepted a takeover offer from the US payments giant Square Inc (NYSE: SQ), the news is still reverberating around the ASX boards. If the US$39 billion deal goes ahead, it will be the largest Australian corporate takeover in history.
But as ASX investors digest the impacts of this megadeal, its far-reaching consequences are coming to light. As part of the all-scrip deal, Afterpay investors are set to receive 0.375 Square shares for every Afterpay share currently owned.
To grease the wheels of this process, Square is putting a dual ASX listing on the table. In other words, Afterpay shareholders will be able to convert their APT shares to a new ASX-listed Square CHESS Depository Interest (CDI) if and when the deal executes.
The consequence, if this occurs, is that Square will barge its way into the top echelons of the S&P/ASX 200 Index (ASX: XJO). That in turn means that all of the ASX exchange-traded funds (ETFs), superannuation funds, and other investment vehicles that track the ASX 200 would immediately have to buy Square shares.
That's pretty big news for a company which this writer would wager many Aussie investors probably only found out about a fortnight ago.
Bye bye CBA? How would Square shares fit into the ASX 200?
The ASX 200 is an index that investors have long described as being heavy on banks and miners. That's a fair observation. As it stands today, a bank in Commonwealth Bank of Australia (ASX: CBA) and a miner in BHP Group Ltd (ASX: BHP) respectively are the two largest ASX shares by market capitalisation (and, as such, ASX 200 weighting). After BHP, we have healthcare giant CSL Limited (ASX: CSL), followed by the other 3 major banks.
Commonwealth Bank currently has a market capitalisation of $184.56 billion. BHP is at $155.57 billion, while CSL stands at $135.41 billion.
Meanwhile, Square stock has a market cap of US$123.14 billion ($167.06 billion) on recent pricing. This would place a Square CDI at second place on the ASX 200, right in between CBA and BHP. That's quite a different top-3 sandwich than ASX 200 investors are normally used to seeing on the Australian share market.
We could conceivably even see Square at the top of this pile. If CBA shares experience a pullback (quite possible according to my Fool colleague James) while Square potentially continues its rapid climb (Square is up almost 90% over the past year alone), we could easily see Square become the ASX 200's biggest company.
What a sight that would be for a 'banks and miners' index!