The Zip Co Limited (ASX: Z1P) share price is on watch this morning as the buy now, pay later (BNPL) leader continues its capital raising spree.
Image source: Getty Images
Why is the Zip share price on watch?
Zip has now conducted a fully underwritten placement of new fully paid ordinary shares to institutional, sophisticated and professional investors.
The Aussie BNPL group managed to raise $120 million before costs at an issue price of $5.34 per share. That compares to a closing Zip share price of $5.11 after falling 1.2% lower in yesterday's trade.
Eligible shareholders are being given the opportunity to participate in a Share Purchase Plan (SPP) and subscribe for up to $30,000 of new shares. The SPP shares will be on offer at the lesser of $5.34 and the volume-weighted average price in the five trading days up to and including 13 January 2021.
The Zip share price is one to watch as the group seeks to raise $30 million before costs under the SPP. The SPP is not underwritten and Zip may decide to increase this cap and accept oversubscriptions and/or scale back applications.
How is Zip looking to spend the money?
Zip has advised that 58% of its successful capital raising will be used to continue the company's growth in the United States (US). The US represents an addressable retail market of $5 trillion with significant market share on offer.
It also advised that 10% of the capital, or $15 million, will be deployed in the UK to scale Zip's operation and establish further infrastructure. An additional 24% of the raise, or $35 million, is set to support the company's newly established New Markets division, which is focused on further acquisitions and growth initiatives.
It's been a good year for BNPL shareholders in 2020, and Zip is no exception. The Zip share price is up 44.4% since the start of the year and 1,088.4% in the last 5 years.
Foolish takeaway
The Zip share price is one to watch in early trade as the BNPL continues with its capital raising plans. Zip currently has a market capitalisation of $2.8 billion, second in the ASX-listed BNPL companies behind the $32.3 billion Afterpay Ltd (ASX: APT).
