The Zip Co Ltd (ASX: Z1P) share price has been a very strong performer on Thursday morning.
At one stage, the buy now pay later (BNPL) provider's shares were up as much as 15% to $8.90.
The Zip share price has eased a bit since then but remains up 8% to $8.32 at the time of writing.
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Why is the Zip share price rocketing higher?
Investors have been bidding the Zip share price higher today amid speculation that a rival BNPL provider has acquired a strategic stake.
According to the AFR, Swedish BNPL provider Klarna is believed to have picked up a 4% stake in Zip in a move designed to strengthen its position if the BNPL market consolidates to two to three leading global players in the future.
Klarna, which is part-owned by Commonwealth Bank of Australia (ASX: CBA), is one of the top three players in the industry alongside Afterpay Ltd (ASX: APT) and Affirm.
Last month the company raised US$639 million in a new funding round led by Japanese giant SoftBank. This gave Klarna a valuation of US$45.6 billion or A$61 billion. As a comparison, Afterpay's market capitalisation currently stands at A$35 billion and Affirm's is US$17 billion or A$22.8 billion.
And based on the latest Zip share price, its market capitalisation lies just short of A$5 billion. This could make it an attractive M&A option should industry consolidation occur in the future.
What now?
Neither Zip nor Klarna have commented on the speculation. And with this strategic stake sitting under 5%, we may not hear anything from either party. This is because only once a shareholder owns an interest of 5% or more are they required to file a notice of initial substantial holder.
Nevertheless, the speculation alone has given the Zip share price a major boost, extending its year to date gain to ~50%.
