Zip Co Limited (ASX: Z1P) has today announced a proposed $60 million capital raising. The capital raising will take place via a $50 million non-underwritten placement to professional and sophisticated investors and a $10 million share purchase plan to existing eligible shareholders.
The offer
Shares in Zip are being offered at $3.70, a 5.6% discount to yesterday's close of $3.98 and 4.7% discount to the 10 day volume weighted average price of $3.88. Funds from the capital raising are earmarked for use in funding Zip Co's expansion in the UK, expanding Zip Co's product range, increasing investment in technology and strengthening the balance sheet.
Under the placement approximately 13.5 million new shares will be issued at $3.70 per share. Under the share purchase plan, existing eligible shareholders will have the right to buy up to $27,000 of new shares per shareholder. The share purchase plan is capped at $10 million but Zip Co reserves the right to increase this limit at its discretion. Applications may also be scaled back where the $10 million cap is exceeded.
Zip Co seeks to support and accelerate the growth of Zip Biz, Zip Co's buy now pay later solution for small businesses. Zip Biz offers up to $25,000 in revolving credit to eligible applicants. Strengthening the balance sheet will further allow Zip Co to support a growing receivables book as transaction volumes increase.
Zip Co business
Shares in Zip Co are up more than 260% over 2019 as the company rides the buy now pay later boom. Earlier this month the company inked a deal with Amazon Australia to provide a buy now pay later option at checkout. Zip Co shares soared on the announcement, increasing nearly 17% from $3.44 to $4.02 over the course of the day.
In its most recent quarterly report, Zip Co reported record quarterly revenues of $31 million in 1Q20, with quarterly transaction volumes of $402.1 million, up 111% year on year. Zip Co now boasts over 1.4 million customers with 147,000 added in the last quarter alone.
Zip Co recently entered into an agreement to acquire New Zealand-based PartPay in August. The acquisition provides exposure to 4 key geographies – the United Kingdom, New Zealand, South Africa, and the United States, and will cost Zip Co NZ$50.8 million in upfront consideration and a further NZ$15 million if certain performance milestones are met.
Foolish takeaway
Zip Co is expanding rapidly and seeking capital to fuel further growth. A favourite of investors in 2019, the buy now pay later provider shows no signs of slowing its aggressive expansion plans.
