Why is the Sezzle (ASX:SZL) share price rocketing 20% higher?

Sezzle is a takeover target…

A woman jumps for joy with a rocket drawn on the wall behind her.

Image source: Getty Images

Key points

  • Sezzle shares are rocketing after confirming takeover talks with Zip
  • Zip is looking to acquire Sezzle but talks are at a preliminary stage
  • No financial details have been provided to the market

The Sezzle Inc (ASX: SZL) share price is having its best day in a long time on Tuesday.

In late morning trade, the buy now pay later (BNPL) provider's shares are up 20% to $2.57.

Why is the Sezzle share price shooting higher?

The catalyst for the rise in the Sezzle share price on Tuesday has been news that the company is a takeover target.

According to the release, Sezzle has confirmed that it is in discussions with larger rival Zip Co Ltd (ASX: Z1P). However, it has warned that talks are at an early stage and there's no guarantee that a transaction will materialise.

The company commented: "Sezzle confirms that it is currently engaged in preliminary discussions with Zip regarding a possible merger. No definitive agreement has been reached between the parties in relation to any transaction. There is no certainty at this time that these discussions will result in a transaction."

Zip also responded to the speculation by confirming the talks. It said: "Zip confirms it is in discussions with Sezzle in relation to a potential acquisition. Zip is always interested in pursuing options that are in the best interests of shareholders."

What price will Zip pay for Sezzle?

Neither party has provided any indication of the proposed terms of the deal. However, The Australian has suggested that Zip would be required to pay a 50% premium to the Sezzle share price at the close of play on Monday.

That would mean a price of approximately $3.21 per share, which values Sezzle at a little under $600 million. While this is a far cry from Sezzle's 52-week high of $11.99, a lot has changed in the sector in respect to valuations since its shares were trading at that level.

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 and has recommended ZIPCOLTD FPO. 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.

More on BNPL shares

A laughing man standing next to a woman holds out his arm to a payments machine to pay with his smartwatch
BNPL shares

Zip vs Block: Which ASX payments share is better?

See how Zip and Block stack up on value, growth, and momentum – and which payments share I’d buy right…

Read more »

Couple enjoying food at a restaurant.
BNPL shares

What would it take for Zip shares to double?

Could this fallen growth share double over the next few years? I run through the numbers.

Read more »

Woman looking at data on her laptop.
BNPL shares

Is the Zip share price a bargain at $2.09?

I look at the earnings forecasts to see how attractive the shares really are at this price.

Read more »

A couple sits on a sofa, each clutching their heads in horror and disbelief, while looking at a laptop screen.
BNPL shares

Zip shares crash another 11% this week: What is going on?

Here's what brokers expect next.

Read more »

A happy shopper with a wide mouthed smile holds multiple shopping bags up around her shoulders.
BNPL shares

Experts tip battered Zip shares to deliver over 90% returns

Zip’s battered share price could be hiding a much brighter future.

Read more »

A happy shopper with a wide mouthed smile holds multiple shopping bags up around her shoulders.
BNPL shares

Experts tip Afterpay owner Block shares to deliver over 50% returns

Block offers investors a compelling long-term fintech growth opportunity.

Read more »

Scared looking people on a rollercoaster ride representing volatility.
BNPL shares

Why Zip shares took investors on a wild ride in August

Zip shares made some big moves in August. But why?

Read more »

Woman with a concerned look on her face holding a credit card and smartphone.
BNPL shares

Is it time to get greedy with Zip shares?

The buy now, pay later provider has suffered several strong headwinds over the past 12 months.

Read more »