The Zip Co Ltd (ASX: Z1P) share price is on course to end the week in a positive fashion.
In morning trade, the buy now pay later (BNPL) provider's shares are up 2.5% to $1.75.
This follows the opening of the company's share purchase plan on Friday.
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Share purchase plan
This morning Zip revealed that its share purchase plan has now opened to eligible shareholders. To be eligible, you needed to be on the company register at the close of play on Friday, 25 February 2022.
Eligible shareholders now have the opportunity to subscribe for up to $30,000 worth of new Zip shares as part of its aim to raise $50 million.
However, whether demand will be there from shareholders is difficult to say. When Zip raised $148.7 million through a placement to institutional investors two weeks ago, it gave them a generous 14% discount.
Retail shareholders look likely to get a discount of just 2% unless there is a big recovery in the Zip share price in the coming weeks.
This is because the share purchase plan will see shares issued at the lesser of the placement price of $1.90 per new share or a 2% discount to the volume weighted average price of Zip's shares during the five trading days up to and including Friday, 1 April 2022, rounded to the nearest cent.
With the Zip share price currently fetching $1.75, it seems more than likely that it will be the second option that dictates the price of the share purchase plan.
Why is Zip raising funds?
The proceeds raised under the placement and share purchase plan will be used to 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).
