Here's why the Zip (ASX:Z1P) share price is in focus today

The Zip Co Ltd (ASX: Z1P) share price is one to watch as the company looks to wrap up its $30 million share purchase plan.

| More on:
Man with binoculars standing on edge of building looking into distance

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

sdf

The Zip Co Limited (ASX: Z1P) share price is on watch this morning as the buy now, pay later (BNPL) leader continues its capital raising spree.

Why is the Zip share price on watch?

Zip has now conducted a fully underwritten placement of new fully paid ordinary shares to institutional, sophisticated and professional investors.

The Aussie BNPL group managed to raise $120 million before costs at an issue price of $5.34 per share. That compares to a closing Zip share price of $5.11 after falling 1.2% lower in yesterday's trade.

Eligible shareholders are being given the opportunity to participate in a Share Purchase Plan (SPP) and subscribe for up to $30,000 of new shares. The SPP shares will be on offer at the lesser of $5.34 and the volume-weighted average price in the five trading days up to and including 13 January 2021.

The Zip share price is one to watch as the group seeks to raise $30 million before costs under the SPP. The SPP is not underwritten and Zip may decide to increase this cap and accept oversubscriptions and/or scale back applications.

How is Zip looking to spend the money?

Zip has advised that 58% of its successful capital raising will be used to continue the company's growth in the United States (US). The US represents an addressable retail market of $5 trillion with significant market share on offer.

It also advised that 10% of the capital, or $15 million, will be deployed in the UK to scale Zip's operation and establish further infrastructure. An additional 24% of the raise, or $35 million, is set to support the company's newly established New Markets division, which is focused on further acquisitions and growth initiatives.

It's been a good year for BNPL shareholders in 2020, and Zip is no exception. The Zip share price is up 44.4% since the start of the year and 1,088.4% in the last 5 years.

Foolish takeaway

The Zip share price is one to watch in early trade as the BNPL continues with its capital raising plans. Zip currently has a market capitalisation of $2.8 billion, second in the ASX-listed BNPL companies behind the $32.3 billion Afterpay Ltd (ASX: APT).

Ken Hall 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 owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Capital Raising

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Real Estate Shares

Goodman share price dips then lifts amid capital raise falling flat

Only $5.1 million was raised in Goodman's $400 million share purchase plan offer for retail investors.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Financial Shares

Undercover surging payments company announces $45 million capital raise

It's been a busy time for this payments company.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Capital Raising

Why did this ASX All Ords defence stock crash 22% today?

Investors seem to be rather furious at this stock.

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Capital Raising

Why is the Goodman share price crashing 7% today?

Let's find out what is weighing down this blue chip this morning.

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.
Earnings Results

Why are Goodman shares in a trading halt on results day?

What's going on with this blue chip on Wednesday? Let's find out.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

Why is this ASX All Ords stock crashing 10% on Friday?

This share is having a tough time. What's going on?

Read more »

A man looking at his laptop and thinking.
Capital Raising

Guess the ASX All Ords stock launching a capital raising at a 52-week low

After failing last month, the struggling company is trying again.

Read more »

Shot of a young businesswoman looking stressed out while working in an office.
Healthcare Shares

Why is the Mesoblast share price crashing 9% today?

What is weighing on this high-flying stock on Tuesday? Let's find out.

Read more »