The Zip Co Ltd (ASX:Z1P) share price will be on watch after it launched a $150 million capital raising to support its growth…
The post Here’s why Zip (ASX:Z1P) launched a $150 million capital raising appeared first on The Motley Fool Australia. –
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.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
- 5 things to watch on the ASX 200 on Thursday
- The Tyro (ASX:TYR) share price is down 20% in one month. Time to buy?
- Openpay (ASX: OPY) share price rockets up 8% after major announcement
- ASX 200 falls on Tuesday
- Creso Pharma and Nuix were among the most traded shares on the ASX last week
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.