Stumbling Block
Block's $39 billion Afterpay acquisition, the most expensive in Australian corporate history, is a cautionary tale for anyone looking to make deals in the latest tech hype cycle.
There’s one stat that neatly encapsulates the frothy valuation at which Block acquired Afterpay back in 2021. Late last year the entire market capitalisation of Jack Dorsey’s fintech conglomerate momentarily dipped below the $39 billion it had forked over for the Australian buy now, pay later play.
There were, of course, once-in-a-generation market forces at play. Yet Block’s Afterpay deal has come to epitomise the peak of the tech hype cycle fuelled by pandemic-era cheap credit. And it offers food for thought as valuations on the Nasdaq build up a head of steam on the back of AI euphoria, and as crypto embarks on another bull run.
Block, the owner of Square, Cash App and Afterpay, is hardly alone in having to take a cold shower, and can count some of Silicon Valley’s most illustrious names as company in being forced to reduce headcount.
But as Jack Derwin reported in this deep dive for Capital Brief today, Block’s recent mass layoffs underline deeper issues. Having diluted shareholders to the tune of 18% to buy Afterpay at the top of the market, Block has struggled to coherently integrate the business, resulting in a bloated workforce with duplicated roles, strategic confusion and a clash of cultures. One Afterpay source quoted in the story went as far as describing the merger as a “disaster”.
