$Block (SQ.US)$ bought some Australian fintech, $Afterpay L...

The reasoning was pristine: "Buy-now-pay-later is a rapidly growing opportunity" with a number of growth drivers:

1. Merchants sifting towards omnichannel and using BNPL to help increase conversion, basket sizes and customer acquisition.

2. Emerging global Buy Now Pay later trend that Square doesn't have.

3. And what I would argue is most important: "consumer preferences shifting away from traditional credit as millennials and Gen Z consumers with growing spending power prefer more inclusive, flexible and transparent ways to pay and manage their finances."

Square believes that of the 10 trillion in on-line payments, only 2% is buy now pay later. That's a lot of room to run.

And that's why, after announcing this agreement, the stock, after falling $12, a typical reaction to an all stock-deal, ended up rallying the equivalent for $40 to arrive at $277 a share.

Before we unpack this analysis let me explain how rare it is to see a company's stock rally on an all stock bid. After all, the arbitrage pressure alone - selling Square and buying Afterpay, should have banged down Square's stock. The initial pressure came from exactly that. I was watching the miraculous rally as it was unfolding as one after another research firm said great things about the deal. Barclays says, "Bold Move into BNPL alongside Q2 stunner," in reference to the fact that the company also reported numbers early and they were quite impressive. Moffett Nathanson said, "Square + Afterpay: Advancing Toward the Holy Grail" which links the merchant better with the customer. But the clincher: JMP saying, "No Premium Looks Too High for BNPL " because it strengthens the "consumer and merchant" ecosystem.