The Zip Co Ltd (ASX: ZIP) share price has jumped 12% after completing its capital raising.
Zip is a buy now, pay later business with operations in two markets – ANZ and the US.
Successful capital raising
Zip announced to the ASX that it has successfully completed its fully underwritten placement raising $217 million (before costs).
The buy now, pay later company’s raising received “strong support from new and existing institutional investments”. It’s issuing approximately 139.1 million of new Zip shares.
The price of these new shares was determined through a bookbuild process. The Zip raising share price was $1.56, representing a 2.8% discount to the closing Zip share price on 16 July 2024 and a 2.6% premium to the underwritten floor price of $1.52.
What is Zip using the money for?
Proceeds from the capital raising will be used to repay its existing corporate debt facility and associated exit fee. The buy now, pay later business is expecting to repay that debt on or around 22 July 2024.
The new shares represent 12.3% of the existing Zip shares on the market before the capital raising.
Management commentary
The Zip CEO and Managing Director Cynthia Scott said:
We are delighted with the extremely strong support we have received from high-quality existing and new shareholders for the placement. This is a strong endorsement of our strategy and we thank our existing shareholders for their ongoing support and welcome our new shareholders to Zip. The placement will enable Zip to repay its existing corporate debt, optimise our capital structure and provide Zip with greater flexibility for future growth.
Zip share purchase plan (SPP)
The company is offering eligible shareholders the opportunity to buy up to $30,000 of new shares free of brokerage.
New shares will be issued at the placement price of $1.56 or a 2% discount to the 5-day average price up to 14 August 2024.
Final thoughts on the Zip share price
In the last year the Zip share price has risen over 300% as financial performance improved. By repaying its debt, its balance sheet is in a much better position. Having a sustainable level of debt (or no debt) is a much more sustainable position.
I don’t know where the Zip share price is going next – there could be a lot more ups and downs – but it has put itself on a much more stable footing over the last 12 months.
