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Afterpay CEO Anthony Eisen defends the company's model after $1.4 billion was wiped from its market capitalisation

Jemima Whyte, AFR

Anthony Eisen says Afterpay is yet to see any impact on its business and is well positioned to weather the "unprecedented environment", after $1.4 billion was wiped from the buy now, pay later company's market capitalisation on Wednesday.

"We advise that we have not seen a material impact on our business activity and timing of instalment repayments or transaction losses to date," Mr Eisen wrote in a two-page letter to investors, following a 33 per cent share price fall.

"The world is currently facing significant challenges as a result of COVID-19. These challenges are generating unprecedented circumstances."

Afterpay said its business model, balance sheet and customer base created "a level of protection in times of economic uncertainty".

On Wednesday, US fund manager Lone Pine revealed it had acquired 5.3 per cent of Afterpay. But its shares continued to slide in early Thursday trading.

Afterpay will formally update the market next month, but Mr Eisen said the group had "put in place the appropriate level of risk mitigation measures into our operating model that take into consideration the current economic environment and continue to monitor this on a daily basis".

He said the company is prepared to add further measures as required, but didn't explain what those were.

Shares have sunk 68 per cent from above $40 in February, to $12.76 on Wednesday, when they slid 33 per cent in the session.

The drastic share price fall wiped $128.8 million from the personal wealth of each of Afterpay's founders, Nick Molnar and Anthony Eisen. Each of their shareholdings are now worth $261 million; just a day earlier they were both worth $389.8 million.

On March 11, they were each worth $552.8 million, based on their shareholdings of 20.4 million shares apiece. Last year, the pair entered the AFR Rich List for the first time, each with an estimated wealth of $487 million. They were ranked 194 and 195.

In the shareholder letter, the company reiterated the service can't be used by customers with one overdue payment and more than 90 per cent of the group's monthly underlying sales are generated by repeat customers.

"We believe the appeal of Afterpay as a disciplined budgeting tool will not be diminished and may be enhanced with changing market conditions," the company said.

Afterpay also reinforced that the average transaction value was $150 and average outstanding balances were $211, with no material concentration from either a merchant or customer perspective.

Afterpay also said its receivables book was less than 30 days, which helped the company in "identifying leading indicators early and modifying risk parameters in the system immediately".

In response to concerns the company is skewed to millennial buyers, Afterpay noted that in Australia, the average customer age was 34 years, and over-indexed in middle and high household income brackets.

Afterpay has more than $1.09 billion of warehouse facilities in place with major financial institutions which the company said would enable the group to grow underlying sales by an additional $15 billion above its second quarter run rate of $11 billion. The facilities are not subject to traditional debt facility covenants.

The company confirmed it would continue to hold "Afterpay Day" on March 19 and 20. "We believe it is important that we continue to support our merchants who are rapidly looking to increase their online exposure in the current environment," the letter said.

More than 75 per cent of Afterpay's underlying sales are from online transactions.

This story originally appeared in the Australian Financial Review. Read the original story here.