Today Affirm, a fintech startup that offers payment options to e-commerce customers, released a new S-1/A filing. The new document follows a late-December filing of a similar nature, though that update focused on changing the language of Affirm’s reported results, tweaking its language to remove some adjusted metrics and hewing closer to generally accepted accounting principles, or GAAP.
The company’s more recent filing details what could be its first IPO price interval, indicating that Affirm may price its shares between $33 and $38 per share in its IPO. If Affirm raises its estimates, expect that price range to tighten.
Let’s calculate Affirm’s valuation marks at its new price range before digging into what we think of the company’s estimated worth against its most recent performance.
Valuation
There are two ways to calculate a company’s IPO valuation. The first takes into account only shares that will exist after the offering. The second, the so-called diluted valuation, takes into account shares that are available for exercise or conversion, but have yet to be. To avoid choosing sides today, we’ll calculate both.
The first, simple valuation is a doddle to tally:
- Affirm shares outstanding post-IPO, including its underwriters’ option: 246,436,771.
- Affirm IPO price interval: $33 to $38 per share.
- Affirm simple IPO valuation range: $8.1 billion to $9.4 billion.
Affirm’s fully diluted valuation involves a larger share count, so it generates larger results. Doing our own math, here’s how it shakes out (Bloomberg came up with slightly different numbers):
- Affirm fully diluted shares outstanding post-IPO, including its underwriters’ option: 318,865,2461.
- Affirm IPO price interval: $33 to $38 per share.
- Affirm fully diluted IPO valuation range: $10.5 billion to $12.1 billion.
At the time of its April, 2019 Series F, Affirm was worth $2.9 billion after the capital was raised, according to PitchBook. The company also raised a $500 million Series G in September of 2020. That final round sold shares at $19.93 apiece, along with some convertible notes, per today’s filing; investors in that transaction are set to do very well in under a year.
Those who put money in even earlier will do even better.
Do those numbers make sense?
Affirm wrapped Q3 2020 with $174 million in revenue, $218.6 million in operating expenses and a net loss of $15.3 million; the company had managed a rare profitable quarter in Q2 of the same year.
As Affirm’s Q4 2019 grew around 48% from Q3 of the same year, in revenue terms, it seems somewhat reasonable to presume that Affirm would also do well this Q4, given the year’s huge e-commerce focus thanks to COVID-19. So let’s presume that Affirm did $200 million in revenue during the fourth quarter of 2020, a number that I suspect will prove conservative.
Regardless, our guesstimate for Affirm’s Q4 2020 revenue would put it on an $800 million annualized run rate. That figure lets us calculate some revenue multiples using our valuations from above:
- Affirm revenue multiple range using simple share count: 10.1x to 11.8x.
- Affirm revenue multiple range using fully diluted share count: 13.1x to 15.1x.
Those look like software multiples applied to a 2021 fintech IPO. An unprofitable one at that. So, I fully expect that Affirm will price at the top end of its current range or above. It has a brand. And it has growth. That’s enough in recent quarters.
Note that we are not saying that those revenue multiples feel correct. I have no real sense for that other than historical norms, the use of which would make me appear more luddite that sentient journalist. The markets of today don’t care for old rules. So, by the rules of now, nothing above shocks me.
More when it gets closer to a final price.
1This figure does not count shares reserved in escrow relating to the Affirm-PayBright deal.
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