This article originally appeared on Simply Wall St News.
Affirm Holdings, Inc . (NASDAQ: AFRM) Shareholders have had a wild ride since the company went public in January. The stock started trading at $ 91 and hit $ 146.90 in one month, before crashing to below $ 50 in May. Since then, there have been several positive developments that have seen the price move back above $ 100 and once again target the February high.
The main novelty has been a partnership with Amazon (NASDAQ: AMZN) whereby Affirm will provide financing to Amazon customers. This announcement resulted in an immediate 43% jump in the share price.
Earlier this month, the company released its fourth quarter results and reported 71% year-over-year revenue growth. This figure is significantly higher than the year-over-year growth of the previous two quarters. Profits were lower than expected, but the market chose to focus on revenue growth.
The “buy now, pay later” credit model has also received a vote of confidence from some major players in the financial industry. In July, Square (NYSE: SQ) entered the BNPL market by acquiring Afterpay for $ 26 billion. Since then, Mastercard (NYSE: MA) and Visa (NYSE: V) have also launched BNPL products.
Check out our latest review for Affirm Holdings
Affirmer Insider Shareholders
Affirm Holdings has a diverse group of insiders, including the founders, management team and early investors of the company. Funds and companies that invested in the company prior to its IPO may not be true “insiders,” but they will generally be closer to the company than other public market investors. When we include companies and funds that invested while the company was still private, insiders own about 25% of Affirm.
Having a management team with “skin in the game” is always reassuring as it can help align the interests of shareholders and the management team. However, when a company goes public, there is always a risk that insiders and early investors will sell shares and drive down the share price. For this reason, IPOs usually have a blocking period to prevent too many shares from entering the market soon after the IPO.
The blocking period, for Affirm, expired on July 12. However, in March a partial release was decreed that allowed some insiders to sell up to 10% of their stake. This early version constituted up to 15.6 million shares available for sale.
The good news is that very few of these shares were sold during the early release period, and no shares have been sold since the remainder of the lock-up period expired. It is particularly noteworthy that the venture capital and private equity firms have held onto their stocks. Typically, private investors will pull out as soon as they feel the rise is limited.
Claiming is still a long way from profitability, and valuing such a business is still a guessing game. But in Affirm’s case, the fact that insiders are holding onto their shares now that the price is well above the IPO level is encouraging. At first glance, this suggests that they are still seeing potential gains to come.
Institutional shareholders now own 36% of the company, which is also encouraging. Ideally, we would like to see this increase more in the future.
We see insiders holding their shares as a vote of confidence in the stock price, which has now risen 137% since the May low. It’s always worth keeping an eye on what insiders are doing – you can follow insider trading here. We have also identified 2 warning signs with Affirm Holdings, and understanding them should be part of your investment process.
Simply Wall St analyst Richard Bowman and Simply Wall St have no positions in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material.
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