The meteoric rise of the Zip Co Ltd (ASX: Z1P) share price has come to an abrupt end on Wednesday.
In afternoon trade the buy now pay later provider’s shares are down 15% to $11.83.
This is a slight improvement on earlier in the day when Zip’s shares were down as much as 19% to $11.27.
Why is the Zip share price crashing lower today?
There appear to have been a few potential catalysts for the decline in the Zip share price today. One of those is general weakness in the tech sector.
It isn’t just Zip shares that are under pressure today. The likes of Afterpay Ltd (ASX: APT) and Appen Ltd (ASX: APX) are also trading notably lower following a weak night of trade on the tech-focused Nasdaq index.
At the time of writing, the S&P/ASX All Technology Index (ASX: XTX) is down 2%.
What else is weighing on the Zip share price?
Profit taking could also be weighing on the company’s shares today. As I mentioned here earlier, prior to today, the Zip share price was up an incredible 143% in the space of a month.
Given that this gain has taken the Zip share price well beyond any broker price targets that I have seen, it would not be overly surprising for a profit taking pull back to occur.
Those strong gains have been driven by its impressive second quarter update, a general re-rating of buy now pay later shares, and speculation that Zip could be planning a secondary listing in the United States.
The latter would allow US fund managers with strict investment mandates to invest and give the company easier access to capital markets in the country.
This leads us nicely onto the third potential catalyst for today’s weakness in the Zip share price.
Speculation that the company was going to list in the United States appears to have given its shares a real lift over the last week or so.
However, in response to an ASX price query yesterday, management made no mention of this speculation when quizzed about what was driving its shares higher.
Investors may be interpreting this as a sign that a secondary listing is not being considered, causing a reversal on some of the gains the speculation has generated.