Why the Laybuy (ASX:LBY) share price is tumbling 15% lower today

The Laybuy Holdings Ltd (ASX:LBY) share price is tumbling notably lower on Wednesday after returning from its trading halt. Here's why…

The Laybuy Holdings Ltd (ASX: LBY) share price has returned from its trading halt and is tumbling lower.

In late morning trade, the buy now pay later (BNPL) provider's shares are down 15% to 58 cents.

a trader on the stock exchange holds his head in his hands, indicating a share price drop

Image source: Getty Images

Why is the Laybuy share price sinking?

The Laybuy share price has come under pressure today after it announced the successful completion of a $35 million capital raising.

According to the release, the company raised the funds from new and existing institutional and sophisticated investors at a massive 26.5% discount of 50 cents per new share.

Laybuy will now seek to raise a further $5 million via a share purchase plan at the same price.

Why is Laybuy raising funds?

The proceeds of the capital raising are to be invested in technology, marketing, and people to accelerate Laybuy's growth in the UK market.

Laybuy's Managing Director, Gary Rohloff, commented: "The opportunity in the UK market should not be underestimated. The UK has a retail market approximately 2.2 times larger than the Australian market in terms of overall spending. It is also a market where a higher proportion of retail spending is online, and where BNPL is still in early stages of adoption,"

"Laybuy is already widely recognised as one of the UK's leading BNPL providers, with consumers spending more than £151 million through Laybuy in the past year, up 504% on prior year. This capital raise is an important step for Laybuy, enabling the company to continue its strong momentum and to capitalise on the significant growth opportunity in the UK market. We believe this will maximise shareholder value in the longer term," Mr Rohloff added.

Strategic Partnership

In addition to the capital raising, Laybuy announced that it is entering into strategic partnerships with Rakuten, AWIN and Sovrn.

According to the release, these partnerships will see Laybuy customers having access to over 5,000 merchants in the UK. This includes major brands ASOS, Nike, Marks & Spencer, Amazon and eBay.

Furthermore, these partnerships will enable customers to use Laybuy's Tap to Pay digital card with these merchants. This allows users to pay with Laybuy both online and in-store without further merchant integration or direct relationships.

While this is a positive, it hasn't been enough to stop the Laybuy share price from sinking today.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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