Affirm Holdings, Inc. (NASDAQ:AFRM) investors lost confidence when a subsidiary of technology giantApple(NASDAQ:AAPL) said it would extend loans forits Buy Now/Pay Later service. Apple’s credit unit will check a user’s credit. Then it will extend short-term loans to “Apple Pay Later” users.
The offering is a smart move to encourage Apple users to use Apple Pay. Not only will it attract new iPhone customers, but it will also keep its existing ones from leaving the platform.
Affirm investors are worried about the risks of the tightening rate environment, economic slowdown and inflation. It manages its funding costs in three ways. Its warehouse financing is a floating rate. Affirm’s other two funding methods areforward flow. This involves bilateral arrangements. They have committed capital levels. The company may sell loans to counterparties on a whole loan basis.
Affirm’s Chief Financial Officer,Michael Linford, does not believethat Apple’s BNPL overlaps with its offering. Apple will likely offer loans to high-income individuals. That lowers the risk of defaults. Ongoing market concerns may send AFRM stock even lower.
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