Unfortunately, it was another week to forget for the Zip Co Ltd (ASX: Z1P) share price and shareholders.
Last week the buy now pay later (BNPL) provider's shares were the worst performers on the ASX 200 index with a 22.2% decline.
This means the Zip share price is now down 60% since the start of the year and 82% over the last 12 months. It also reduces the Zip market capitalisation down to approximately $1.15 billion.
What happened to the Zip share price?
Investors were selling down the Zip share price last week following the completion of a ~$150 million institutional placement and in response to its plan to acquire BNPL rival Sezzle Inc (ASX: SZL).
In respect to the former, Zip raised the funds at a sizeable 14% discount of $1.90 per new share. Though, even at that level of discount, institutional investors are still under water, with the Zip share price ending the week at $1.72.
As for the latter, the market didn't react too positively to the proposed all-scrip acquisition of Sezzle Inc (ASX: SZL).
For example, in response to the news, the team at UBS downgraded the company's shares to a sell rating and cut the price target on them by a massive 80% to a lowly $1.00.
Were the Zip share price to fall to $1.00, it would be the lowest level it has traded at since 2018.
Elsewhere, Macquarie believes Zip might have overpaid for Sezzle and Citi suggested some of the synergy targets could be a little too optimistic.
Glimmer of hope
It is worth pointing out that not everyone is bearish on the acquisition or the Zip share price.
Analysts at Morgans believe the deal makes strategic sense. And while the broker has slashed its price target down to $3.94, this is still more double where its shares currently trade.
Morgans commented: "Clearly, the Sezzle deal makes strategic sense for Z1P. The deal increases both Z1P's global transaction levels (currently A$7.9bn) and customer base (currently 9.9m) by around ~30-35% respectively. It gives Z1P a materially stronger position in the key US market, with Z1P/Sezzle customer overlap being relatively contained (25%). A stronger product mix and enhance distribution channel mix are other benefits."
"Clearly the global environment has changed for BNPL operators and for investors it's now not a space for the faint hearted. We do, however, think the global growth opportunity remains large for companies that can execute in the BNPL space. The scale provided by the acquisition of Sezzle and a more considered growth agenda, could see Z1P be one of those winners, and with Z1P now trading on 2x revenue, we maintain our ADD recommendation," it concludes.
Time will tell which analysts make the right call.
