Is the Zip Co share price in the buy zone?

The Zip Co Ltd (ASX:Z1P) share price has returned from its trading halt. Should you invest?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Zip Co Ltd (ASX: Z1P) share price has returned from its trading halt this morning and edged lower.

At the time of writing the payments company's shares are down 1% to $1.64.

Why was Zip in a trading halt?

Zip requested a trading halt on Wednesday whilst it sought to raise $42.8 million before costs via a placement of 28 million ordinary shares.

This morning the company announced that it has successfully completed the placement thanks to support from new and existing institutional, sophisticated and professional investors. In fact, demand was so high for its shares that the placement closed early.

The issue price for the placement was $1.53 per share, which represents a 7.8% discount to the last traded price of the company's shares.

The money raised from the placement could increase by a further $8.9 million if banking giant Westpac Banking Corp (ASX: WBC) decides to take up its top-up right. This was granted to the bank as part of its investment in Zip in 2017 and will allow it to maintain its percentage holding in the company.

Notice has been given to Westpac, but it has not yet advised whether it will take advantage of its top-up right. It has until April 1 to decide.

What now?

Larry Diamond, managing director and CEO of Zip, explained that the additional capital will be used to fund its growth strategies.

He 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 as part of this equity raise. The additional equity capital will enable Zip to continue its significant growth through further investment to support our brand, enhance our product, and monetise our assets. The capital raising will also provide a stronger balance sheet to capitalise on growth opportunities, both organic and inorganic."

Should you invest?

With Afterpay Touch Group Ltd (ASX: APT), Splitit Ltd (ASX: SPT), and FlexiGroup Limited (ASX: FXL) all offering buy now, pay later services, investors certainly have a lot of options in the space.

Whilst Afterpay Touch remains my preferred pick due to its global growth opportunities, I think Zip Co is well worth considering as well. I've been very impressed with its progress and believe it has a bright future ahead of it.

Motley Fool contributor James Mickleboro owns Westpac shares. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended FlexiGroup Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Growth Shares

a happy investor with a wide smile points to a graph that shows an upward trending share price
Growth Shares

Here are the top five ASX 200 shares in Macquarie's model growth portfolio

These ASX 200 shares are highly rated by analysts at Macquarie.

Read more »

a man with a wide, eager smile on his face holds up three fingers.
Growth Shares

3 ASX shares to buy in 2024 and hold for the next 10 years

Analysts think these top shares are in the buy zone right now.

Read more »

A man leans forward over his phone in his hands with a satisfied smirk on his face although he has just learned something pleasing or received some satisfying news.
Growth Shares

4 ASX growth shares I think will benefit from interest rate cuts in 2024

Not only will home loan holders rejoice, investors of these stocks could also be yelling with joy when the Reserve…

Read more »

A smiling woman sits in a cafe reading a story on her phone about Rio Tinto and drinking a coffee with a laptop open in front of her.
Growth Shares

3 of the best ASX growth shares to buy now

Analysts see plenty of upside for these buy-rated shares.

Read more »

A man and woman in an office look at a laptop and discuss investing, budget strategies or other financial concepts
Growth Shares

Here's why analysts love these buy-rated ASX 200 growth shares

There's a reason analysts are feeling bullish about these companies.

Read more »

A woman with strawberry blonde hair has a huge smile on her face and fist pumps the air having seen good news on her phone.
Growth Shares

Big returns could be coming for high-flying Lovisa shares

Morgans doesn't believe it is too late to snap up this hot stock.

Read more »

Smiling young parents with their daughter dream of success.
Growth Shares

Why these ASX 200 growth shares could be top buys now

Analysts are feeling bullish about these growth stocks. Let’s see what they’re saying.

Read more »

Concept image of a man in a suit with his chest on fire.
Growth Shares

Ignore the noise and buy this hot ASX growth stock

A recent pullback may have created a buying opportunity according to Bell Potter.

Read more »