Afterpay Limited – Implication of APT ETOs under proposed acquisition by Square, Inc.

Market Participants and ASX Clear (ASXCL) Participants are advised that Afterpay Limited (ASX code: APT) have entered into a Scheme Implementation Deed under which Square, Inc. has agreed to acquire all of the issued shares in Afterpay by way of a recommended court-approved Scheme of Arrangement.

Under the terms of the Scheme Implementation Deed, Afterpay shareholders will receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay ordinary share they hold on the record date.  Square may elect to pay 1% of total consideration in cash.  Square has agreed to establish a secondary listing on Australian Securities Exchange (ASX) to allow Afterpay shareholders to trade Square shares via CHESS Depositary Interests (CDIs) on the ASX.  Afterpay shareholders will be able to elect whether to receive the consideration in NYSE listed Square Class A common stock or CDIs.

The transaction is subject to shareholders and regulatory approvals and various other conditions.  Participants are asked to refer to the Afterpay announcement for more information regarding the terms of the transaction.

It is anticipated that transaction will close in the first quarter of calendar year 2022.  These dates are indicative and subject to change.

Termination Implications for APT ETOs

According to the terms of the transaction, Afterpay shares will cease trading after the transaction becomes effective.  ASX has consulted ASXCL on the implications for APT ETOs in relation to the transaction.  

In the event that the Square, Inc. acquisition is successful, APT ETOs will be terminated on the last trading day of Afterpay shares. The basis price for the APT ETOs termination will be that of the last traded price of Afterpay shares.

Option positions held over Afterpay shares at the close of business on the last trading date, will be closed out and cash settled at intrinsic value. Takers will be credited and writers debited. The intrinsic value method is equivalent to the expiry of the options effectively brought forward to the last day of trading of the underlying security. ASXCL will settle these cash amounts on the following business days.

At this time ASX and the broader Australian market is not in a position to process US withholding tax as a result of “dividend equivalent” payments on derivative products. This covers options listed over US based CDI structures, with a delta of 0.8 or higher.  Square, Inc. is captured by US IRS regulation if the APT transaction is successful. For further information on this refer to Section 871(m) of the US IRS regulation.

What do I need to do by when?

Participants should be aware of the content of this Notice as it sets out the treatment of the termination with respect to open positions in ASX APT ETO contracts.

Effective Date

The full timetable of the transaction hasn’t been announced by Afterpay.  A further notice will be released when there are further information available.

Need more information?

Issued by

Cheng Zhang, Equity Operations

Contact information

Cheng Zhang
1800 623 571
chesshelp@asx.com.au

Disclaimer