SQ – No Traded CDS, Base Case iCDS 49bps, Negative Case iCDS 152bps, 2026 2.750% Bond YTW of 4.921%, iYTW of 3.421%, Ba2 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

April 22, 2022

  • Credit markets are overstating credit risk, with a cash bond YTW of 4.921%, relative to an Intrinsic YTW of 3.421% and an Intrinsic CDS of 49bps. Furthermore, Moody’s is also overstating SQ’s fundamental credit risk with its Ba2 credit rating four notches below Valens’ IG4+ (Baa1) credit rating
  • Incentives Dictate Behavior™ analysis highlights mostly negative signals for credit holders. That said, most management members are material owners of SQ equity relative to their annual compensation, indicating they are well-aligned with shareholders for long-term value creation.
  • Earnings Call Forensics™ of the firm’s Q4 2021 earnings call (2/24) highlights that management generated an excitement marker when discussing Afterpay’s history of driving over 1 million leads per day prior to the acquisition

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