Why the Zip (ASX:Z1P) share price is rocketing 15% higher today

Has this BNPL provider got a new admirer?

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The Zip Co Ltd (ASX: Z1P) share price has been a very strong performer on Thursday morning.

At one stage, the buy now pay later (BNPL) provider's shares were up as much as 15% to $8.90.

The Zip share price has eased a bit since then but remains up 8% to $8.32 at the time of writing.

Why is the Zip share price rocketing higher?

Investors have been bidding the Zip share price higher today amid speculation that a rival BNPL provider has acquired a strategic stake.

According to the AFR, Swedish BNPL provider Klarna is believed to have picked up a 4% stake in Zip in a move designed to strengthen its position if the BNPL market consolidates to two to three leading global players in the future.

Klarna, which is part-owned by Commonwealth Bank of Australia (ASX: CBA), is one of the top three players in the industry alongside Afterpay Ltd (ASX: APT) and Affirm.

Last month the company raised US$639 million in a new funding round led by Japanese giant SoftBank. This gave Klarna a valuation of US$45.6 billion or A$61 billion. As a comparison, Afterpay's market capitalisation currently stands at A$35 billion and Affirm's is US$17 billion or A$22.8 billion.

And based on the latest Zip share price, its market capitalisation lies just short of A$5 billion. This could make it an attractive M&A option should industry consolidation occur in the future.

What now?

Neither Zip nor Klarna have commented on the speculation. And with this strategic stake sitting under 5%, we may not hear anything from either party. This is because only once a shareholder owns an interest of 5% or more are they required to file a notice of initial substantial holder.

Nevertheless, the speculation alone has given the Zip share price a major boost, extending its year to date gain to ~50%.

Motley Fool contributor 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 and has recommended AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended 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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