Here's why Zip (ASX:Z1P) launched a $150 million capital raising

The Zip Co Ltd (ASX:Z1P) share price will be on watch after it launched a $150 million capital raising to support its growth…

| More on:
Rolled up notes of Australia dollars from $5 to $100 notes

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Zip Co Ltd (ASX: Z1P) share price will be one to watch after the buy now pay later provider announced a capital raising.

What did Zip announce?

Late on Wednesday Zip announced the launch of a $150 million capital raising.

This comprises an underwritten $120 million placement to institutional and sophisticated investors and a non-underwritten $30 million share purchase plan.

According to the release, Zip is raising the funds at $5.34 per new share, which represents a 4.1% discount to its last close price of $5.57.

Why is Zip raising funds?

Zip revealed that it is undertaking the capital raising to support its US growth and UK expansion, explore new markets, and product expansion.

The majority of the proceeds will be used on its growing US-based QuadPay business. Management intends to deploy 58% or $85 million of the capital in this market.

It notes that it has been experiencing significant growth in the $5 trillion market. In November, the company's transaction value and customer number tripled to $264.2 million and 2.8 million, respectively. Pleasingly, it is achieving this growth with market leading unit economics.

Management wants to build on this and expects the capital raising to accelerate its growth. This includes customer acquisition, app usage, and merchant partnerships.

What else are the funds being used for?

Approximately 10% or $15 million will be deployed in the UK to scale its operations, support merchant and customer acquisition, and underpin its receivables funding until a local facility is established.

In addition, Zip intends to use 24% of the raise or $35 million to support its recently established New Markets division. This side of the business has been established to lead the active pursuit of global growth opportunities. It will also invest in strategic interests, greenfield launches, and local partnerships outside its core business.

The company revealed that its New Markets division has already made a couple of strategic investments. The first is United Arab Emirates-based buy now pay later provider, Spotii. The second is leading payments platform provider Twisto. The latter is operational in Czechia and Poland. It has an omni-channel product set aligned with Zip and the ability to passport licensing across the European Union.

Finally, the remaining 8% or $12 million will be deployed in the ANZ market. This includes supporting the launch of the Zip Business offering and the development of additional products within its digital wallet.

Should you invest $1,000 in Zip Co right now?

Before you buy Zip Co shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Zip Co wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 7 February 2025

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Smiling couple looking at a phone at a bargain opportunity.
Opinions

Near 52-week lows, are these ASX 300 shares now unmissable bargains?

Are these stocks at valuations that are too good to ignore?

Read more »

A businessman hugs his computer and smiles.
Opinions

If I could only buy and hold a single ASX stock right now, this would be it

This business has a lot of positives.

Read more »

A woman walks along the street holding an oversized box wrapped as a gift.
Best Shares

Top ASX shares to buy following earnings surprises

Who doesn't love a surprise?

Read more »

A runner high-fives as he crosses the finish line in pole position
Share Gainers

Here are the top 10 ASX 200 shares today

It was a woeful end to a woeful week this Friday for ASX investors.

Read more »

Investor looking at falling ASX share price on computer screen
Earnings Results

2 ASX All Ords shares crashing 16%+ on earnings updates

It's a red day for the market on Friday.

Read more »

Siblings jumping on a trampoline.
Share Gainers

3 ASX 200 stocks rocketing higher in this week's falling market

These three ASX 200 outperformers have surged 17% to 28% this week!

Read more »

Piggy bank rocketing.
52-Week Highs

ASX shares lifting to 52-week highs on Friday

Do you own any of today's winners?

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »