Zip (ASX: Z1P) has announced that it is going to conduct a capital raising to raise up to $60 million from investors.
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.
Zip’s Capital Raising
The buy now, pay later business has announced it’s going to raise a proposed $60 million. This includes a $50 million non-underwritten placement to professional and sophisticated investors.
The other $10 million Zip will try to raise is $10 million from a share purchase plan (SPP) to all existing eligible shareholders.
The SPP will open on 6 December 2019 and close on 20 December 2019.
Capital Raising Price
The offer price is $3.70 per share. This represents a 5.6% discount to the last closing price of $3.92. It’s a 4.7% discount to the weighted average share price over the past 10 days of $3.88.
What Will The $60 Million Be Used For?
One of the main reasons that Zip is raising money is so that it can fund its expansion into the UK market.
Another use of the capital will be to expand Zip’s product range, including the launch of Zip Biz – this is a buy now, pay later option for small businesses.
Zip management also plan to put the money towards investing in its product & technology and strengthen Zip’s balance sheet.
Zip’s FY20 Targets
Zip said that it’s confident in its ability to drive growth, achieve its targets and expand globally with a deliberate lift, shift and scale strategy.
The company has hired Anthony Drury as its UK Managing Director, he has more than 20 years of payments experience at American Express, PayPal and Easyjet. The full rollout is scheduled for the March 2020 quarter.
The buy now, pay later business is targeting 2.5 million customers by June 2020 and annualised transaction volume of $2.2 billion by the end of FY20.
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At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.