Why the Zip Co share price tumbled 7% lower today

The Zip Co Ltd (ASX:Z1P) share price has come under pressure on Thursday. Is this why?

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One of the worst performers on the All Ordinaries index on Thursday has been the Zip Co Ltd (ASX: Z1P) share price.

In afternoon trade the payments company's shares are down a sizeable 7% to $2.37.

Why is the Zip Co share price tumbling lower?

There appears to be a couple of potential catalysts for the selling today. The first is weakness in the tech sector this afternoon which is likely to be weighing on investor sentiment.

It isn't just Zip Co tumbling lower. At the time of writing the likes of Afterpay Touch Group Ltd (ASX: APT), Altium Limited (ASX: ALU), Appen Ltd (ASX: APX), and WiseTech Global Ltd (ASX: WTC) are all down around 3%.

Another potential catalyst for the selling is Zip Co's recent share purchase plan (SPP). Earlier this week Zip Co announced that its SPP closed significantly oversubscribed following a strong shareholder response and the decision of Westpac Banking Corp (ASX: WBC) to exercise its top-up rights in full.

The SPP allowed eligible shareholders the opportunity to subscribe for up to $15,000 worth of new shares at the discounted price of $1.53.

The new shares from the SPP were allotted today and are expected to be quoted on the ASX on Tuesday April 23. I suspect that some shareholders that have been allotted shares have decided to offload some of their existing shares today ahead of them being quoted on the ASX on Tuesday.

After all, $15,000 worth of shares in the SPP would have had a market value of $25,000 based on Wednesday's close price of $2.55. It isn't hard to see why some shareholders would have been tempted to sell shares today.

Should you buy the dip?

I'm a big fan of Zip Co and think it could be a great long-term investment. However, I would suggest investors wait for the dust to settle on its SPP before picking up shares.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, Appen Ltd, and WiseTech Global. 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.

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