Shopify earns $ 2 billion with Affirm IPO, six months after the partnership

Shopify has just come out of a year of tremendous growth, as the Covid-19 pandemic spurred the massive growth of online shopping. Now 2021 is starting strongly, thanks to an 8% stake in Affirm, the first notable technology IPO of the year.

Both companies have seen their businesses explode since the beginning of last year, when Covid-19 forced physical retailers to close, giving consumers an even greater incentive to shop online.

Shopify’s stock price nearly tripled in value in 2020, as retail chains, restaurants and supermarkets turned to its software to create fast web displays, manage payments and keep their businesses running. Its market capitalization has exceeded $ 140 billion. Affirm, founded in 2012, partners with retailers to offer consumer loans, allowing buyers to pay in installments for items like Peloton bikes, Dyson vacuums and Oscar de la Renta bags.

The two companies entered into a partnership in July for online lender Affirm to become the exclusive supplier or point of sale financing for Shop Pay, Shopify’s checkout service. As part of the deal, Shopify received a subscription bonus to purchase up to 20.3 million Affirm shares.

With Affirm’s Nasdaq debut on Wednesday, Shopify’s share is worth about $ 1.9 billion. Affirm jumped 98% to $ 96.84 in the early afternoon in New York.

With the partnership, Affirm became the provider of Shopify’s new “buy now, pay later” financing service, called Shop Pay Installments, launched for some U.S. merchants late last year.

Affirm said in its prospectus that the Shopify business has enabled “to significantly expand the number of merchants and consumers on our platform”. Shopify serves more than a million companies and said in October that the gross volume of goods in the third quarter more than doubled over the previous year, to $ 30.9 billion.

At the time of the announcement, CEO and founder Max Levchin told CNBC that Shopify and Affirm will have a “tightly integrated partnership” that allows merchants to “press a button” for the product to be launched.

“We expect massive membership,” said Levchin in the interview. “By making integration so easy, we expect it to be extremely close to total omnipresence.”

The diversification of tenants that Shopify offers is important for Affirm, which relied on Peloton for 30% of revenue in the last period.

But getting access to Shopify’s broad customer base came at a tremendous cost – Affirm gave Shopify the right to buy more than 20 million shares at a penny each. A quarter of the shares issued in the original subscription bonus were acquired in July. The remaining 15.2 million belong to the IPO.

Shopify is Affirm’s third largest shareholder. The only major owners are founder and CEO Max Levchin, whose 11% stake is worth $ 2.7 billion, making him the latest member of the so-called “PayPal mafia” to become a billionaire, and Jasmine Ventures, who does part of Singapore’s sovereign wealth GIC fund and owns 9%.

The next biggest holders are Lightspeed Venture Partners, Peter Thiel’s Founders Fund and Khosla Ventures.

Shopify’s stock changed little on Wednesday, trading at $ 1,188.73.

TO WATCH: Affirm partners with Shopify to provide ‘Shop Pay’ installment plans