The Zip Co Ltd (ASX: Z1P) share price has returned from its trading halt and is tumbling lower.
In morning trade, the buy now pay later (BNPL) provider's shares were down as much as 11% to a new 52-week low of $1.96.
At the time of writing, the Zip share price has recovered a touch but remains down 7% to $2.05.
Why is the Zip share price falling today?
This morning Zip announced the successful completion of its fully underwritten $148.7 million institutional placement. These funds were raised at $1.90 per new share, which represents a 14% discount to the Zip share price prior to its halt.
This placement will result in the issue of approximately 78.3 million new Zip ordinary shares, representing approximately 13.3% of existing shares on issue.
Zip will now push ahead with its share purchase plan, which is aiming to raise a further $50 million from retail shareholders. These funds will be raised at the lower of the placement price or a 2% discount to the five-day volume weighted average price (VWAP) of Zip shares up to and including the closing date of the share purchase plan. This is currently scheduled for Friday, 1 April 2022.
Why is Zip raising funds?
The proceeds raised under the placement will help Zip strengthen its balance sheet and position the company for sustainable growth.
This is by providing more capital runway to execute on the potential synergies from its proposed $491 million all-scrip acquisition of Sezzle Inc (ASX: SZL), which was also announced on Monday.
Speaking of which, management believes the acquisition of Sezzle will significantly enhance Zip's scale and product offering, with the capabilities to accelerate in the United States.
It also sees potential material cost synergies and opportunities for revenue and margin uplift. So much so, it is targeting potential EBTDA benefits of up to ~$130 million EBTDA in FY 2024.
Zip's Co-Founder and Global CEO, Larry Diamond, commented: "We are delighted to be bringing Zip and Sezzle together under a transformational transaction that is expected to deliver immediate scale and enhanced growth, which will support our path to profitability. Combining with Sezzle positions us as a leading global BNPL provider and prioritises our ability to win in the important U.S. market."
