The ThinkSmart (LSE:TSL) share price exploded this month, rising more than 60% in a single day. The company was founded in 2007 with the mission to provide intuitive, reliable, and cost-effective business software solutions. That certainly sounds promising to me. But what caused this enormous surge in the stock price? And should I be adding ThinkSmart shares to my portfolio? Let’s take a look.
A little bit of background
Since its IPO in early 2017, ThinkSmart has failed to attract investor interest, most likely due to its declining revenues. In fact, for the majority of its public life, ThinkSmart’s share price has struggled to stay above 10p.
To stay afloat, the management team made the bold decision to sell 90% of its Clearpay subsidiary to the Australian payments giant, AfterPay. Clearpay enables individuals to use a buy-now-pay-later service that has recently started gaining a lot of popularity. This has been the most promising part of the company for many investors. And is one of the main reasons why the ThinkSmart share price started to rise throughout 2020 as the pandemic led to many people adopting this payment solution.
But does this have to do with the stock’s sudden surge?
What made the ThinkSmart share price jump?
The decision to hold onto 10% of Clearpay has proven itself to be a very sensible decision. Because AfterPay and, in turn, Clearpay has just been acquired by another payments giant, Square, for $29bn.
As a result, the Clearpay business has now received access to the entirety of Square’s merchant network. And while ThinkSmart is only going to be getting 10% of the proceeds, that’s still a massive surge in cash flowing into the struggling business. So I’m not surprised to see the ThinkSmart share price explode on the news.
Should I buy ThinkSmart shares?
This latest acquisition may have just breathed new life into this business. And now, various analysts have placed share price forecasts of up to 192p over the next twelve months.
After some of my own investigating, I think they may be right. The fate of the company is now largely tied to Square. And with the value of this investment set to increase, ThinkSmart’s share price will undoubtedly follow.
A £1,000 investment before the announcement was made would now be worth around £1,600 in less than 20 days. I doubt this growth repeat itself in such a short space of time. But over the long term, I believe the ThinkSmart share price can continue to climb higher. Therefore I am considering adding this business to my portfolio today.
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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.
