It was a disappointing day for the Zip Co Ltd (ASX: ZIP) share price today on the ASX.
Zip shares ended up finishing the trading day down by a notable 1.99% at $1.23 a share. That was a substantial underperformance from the buy now, pay later (BNPL) share against the S&P/ASX 200 Index (ASX: XJO), which lost 0.53%.
That puts Zip at a nasty year-to-date loss of more than 70%. So it's hardly a day where Zip shareholders would appreciate even more bad news. But that might have come their way nonetheless.
One of the largest global players in the BNPL space is the Swedish company Klarna. Commonwealth Bank of Australia (ASX: CBA) is a major backer of Klarna, having first invested in the company in early 2021.
But how the times have changed. Back in early 2021, BNPL was all the rage for ASX investors. There were the days of Zip at $10 to $12 a share, after all.
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CBA slashes its own BNPL valuations…
But CBA has just revealed what it is valuing its Klarna stake at today, and it's not a pretty sight. So CBA released its much-anticipated full-year results for the 2022 financial year this morning. We went through the good stuff earlier today if you missed it.
But deep in CBA's annual report, some sobering statistics were lurking regarding the bank's stake in Klarna. The bank advised that it invested an additional $47 million into Klarna in early July as part of the BNPL provider's latest funding round.
But CBA has now revealed that its total investment in Klarna totals $408 million as of 30 June 2022. That's an extraordinarily painful write-down of the $2.7 billion it was valued at on 30 June 2021, a write-down worth around 85%.
Here's some of what the bank said on this dramatic revaluation:
The $2,293m reduction in valuation from 30 June 2021 to 30 June 2022 was driven by changes in the valuation implied from each private equity capital raise, as well as the reduction in revenue multiples of market listed comparable companies.
What does this mean for the Zip share price?
Now this news isn't directly linked to Zip of course. But the part about "the reduction in revenue multiples of market listed comparable companies" certainly alludes to Zip's dramatic fall in value over the year so far.
It's certainly not good news for the BNPL space as a whole, of which Zip is a big player here on the ASX.
No doubt shareholders will be hoping for some good news going forward.
At the current Zip Co share price, this ASX BNPL share has a market capitalisation of $854.5 million.
