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On the 25th of November, Square’s Cash App announced a “definitive agreement” to buy Credit Karma’s tax unit for $50 million cash.
The stock of American payments company Square Inc (NYSE: SQ) jumped nearly 5% in reaction to the news that the company would be acquiring the tax unit of Credit Karma. In the last five days, Square stock has climbed about 14.76%. Although the deal is yet to be closed, the companies hope to complete the transaction before the end of 2020. Until then, the two companies will continue to operate independently.
Square Stock Rose as Company Buys Credit Karma Tax
On the 25th of November, Square’s Cash App announced a “definitive agreement” to buy Credit Karma’s tax unit for $50 million cash. In addition to the services Cash App offers to its users, the acquisition will now allow the financial service provider to help Americans electronically file their taxes for free.
In addition, the new tax product will expand Cash App’s services and make the filing process easier for millions of Americans.
Cash App lead Brian Grassadonia commented on the company’s new acquisition. He said that the company is continually working on providing easy-to-use and globally accessible services to its customers. Grassdonia added:
“That’s why we’re thrilled to bring this easy-to-use tax product to customers as we continue to build out the suite of tools Cash App offers. With this acquisition, we believe Cash App will be able to ease customers’ burden of preparing taxes every year.”
Over the years, Americans have transited to filing taxes themselves. The US Internal Revenue Service (IRS) noted that about 80 million American taxpayers arranged and electronically filed their tax revenues by themselves. In the most recent filing season, about two million taxpayers processed and filed their tax returns with Credit Karma Tax.
Also, the director of engineering at Credit Karma, Patrick Fink, said:
“Filing taxes is critical and challenging for all Americans, and in recent years we’ve seen more customers shift to filing taxes themselves. Credit Karma Tax provides a seamless, mobile-first solution for individuals to file their taxes at no cost. We’re excited to be joining an entrepreneurial team and continue to build simple, innovative tools for Cash App customers.”
More on Square and Credit Karma’s ‘Definitive Agreement’
During the transaction between the two companies, Fenwick & West LLP and Cleary Gottlieb Steen & Hamilton LLP acted as legal advisors for Square. Skadden, Arps, Slate, Meagher & Flom LLP, and Wilson Sonsini Goodrich & Rosati are legal advisors for Credit Karma. In addition, Goldman Sachs Inc acted as Credit Karma’s financial advisor.
Currently trading at $214.50, Square stock is 0.74% up over its previous close of $212.92. Square Inc has been surging significantly over the past year. The payment services provider has grown 205.70% in the last twelve months and over 240% since the beginning of 2020. Also, SQ rose 38.49% in the last three months and recorded an increase of 27.40% over the past month.