Why the Zip (ASX:Z1P) share price is in a trading halt

The Zip Co Ltd (ASX:Z1P) share price has been on a wild road on Wednesday. Here’s why it has ended up in a trading halt this afternoon…

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It has been a very eventful day for the Zip Co Ltd (ASX: Z1P) share price on Wednesday.

At one stage today, the buy now pay later (BNPL) provider’s shares were up as much as 9% to $10.61.

However, the Zip share price began to fade in afternoon trade, leading to it giving back its gains and more.

This left the company’s shares trading 1% lower at $9.61 before being hurried into a trading halt.

Why is the Zip share price in a trading halt?

This afternoon Zip requested a trading halt pending the release of an announcement relating to a capital raising.

The company expects that the trading halt will remain in place until the commencement of normal trading on Friday 16 April.

What is Zip aiming to raise?

While the company has not revealed what it is seeking to raise, the AFR understands that it is aiming to raise $300 million-plus.

According to the report, Zip will follow the lead of rival Afterpay Ltd (ASX: APT) by raising these funds via a convertible notes offering. Last month Afterpay completed its $1.5 billion notes offering.

With the Zip share price up 72% since the start of the year, it appears as though management sees now as an opportune time to raise money at good price.

Though, some shareholders will no doubt be disappointed with the news given that it wasn’t that long ago that Zip raised funds.

In January the company completed a placement and share purchase plan which raised a total of $176.7 million at an issue price of ~$5.34. This led to Zip having almost $1.5 billion of liquidity in Australia at the end of March, according to yesterday’s third quarter update.

Positively, the report suggests that Zip will not struggle to raise the funds given the appetite for convertible notes from institutional investors. And given the rate in which its US-based Quadpay business is growing, Zip’s convertible notes are likely to be an attractive proposition for many investors.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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