Should Investors Be Concerned About Affirm's Delayed Bond Sale?
On March 14, the buy now, pay later (BNPL) company Affirm (NASDAQ: AFRM) raised its outlook for the current quarter and the full fiscal year, which ends June 30. The stock slumped more than 15% that day. Despite a tough day for markets, Bloomberg had also reported just a day before that the company had to postpone the sale of one of its bonds after an investor had pulled out at the last minute due to market volatility and concerns about the risk. Should investors be concerned? Let's investigate.
The delayed sale had to do with one of Affirm's asset-backed securities (ABS), which is a pool of Affirm loans the company had packaged together through a trust or special purpose vehicle to sell to investors, which it has done several times before. Investors buy the securities, removing them from Affirm's balance sheet. The investors then collect principal and interest from the borrowers' payments on their individual loans.
According to Bloomberg, which cited anonymous sources, one of the main investors who had planned to purchase securities from the highest-rated tranches in the ABS pulled out at the last second due to volatility in the broader markets "that may have led to wider risk premiums than the company wanted."
Source Fool.com
