Zip Co Ltd (ASX: Z1P) shares have dropped 2.4% after returning to trade from a capital raising.
Zip Co provides customers with a revolving line of credit to finance their retail purchase with its brands of Zip Pay, Zip Money and Pocketbook. It is one of the largest buy now, pay later providers in Australia. Some of its largest clients include Bunnings Warehouse, Appliances Online, EB Games and Officeworks.
Why Zip Shares Are Down 2%
After speculation about what the capital raising entailed, today we learned what has happened.
The buy now, pay later business raised $42.8 million (before costs) through a placement to institutional, sophisticated and professional investors.
The company said that the proceeds will be used to accelerate growth initiatives and strengthen the company’s balance sheet. Regular investors will also have the opportunity to participate in a capital raising in the share purchase plan.
Zip Co CEO Larry Diamond said: “We greatly appreciate the support of our existing shareholders that participated in the Placement and welcome all the new shareholders that have joined our register.”
Is Zip Co A Buy?
Zip and Afterpay Touch Group Ltd (ASX: APT) are changing the retail landscape, but I’m not sure how to value them. The potential growth is exciting, but who knows what will happen during a recession or if a large competitor (like a bank) enters the fray? I’m happy to watch from the sidelines.
2 ASX Growth Shares Better Than Zip Co
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