Today is a big day for the Zip Co Ltd (ASX: Z1P) share price. Not because Zip shares are currently down 0.92% at $1.41 each, although that might come as a disappointment to shareholders. But because 16 million new Zip shares just hit the ASX.
Yes, the buy now, pay later (BNPL) company now has 16 million more shares trading on the ASX today than it did on Friday. But why? And what does this mean for investors?
Well, as we covered last week, the new Zip shares are arriving as a result of the company's recent share purchase plan (SPP). This was initiated last month and was open to all retail shareholders. These shareholders were given the chance to purchase up to $30,000 worth of new Zip shares. This was for a fixed price of $1.48 per share (unfortunately above the current Zip share price, as it turns out).
Zip told its investors that it was raising this extra capital to shore up its balance sheet, as well as to grease the wheels of its ongoing plans to merge with the fellow BNPL company Sezzle Inc (ASX: SZL). Perhaps unfortunately for the company, investors only subscribed to $23.99 million of the $50 million that Zip had available. But still, the company will be $23.99 million richer today as 16 million new shares, paid for by these investors, hit the ASX boards.
Image source: Getty Images
Zip share price snapshot
So you might expect such a large parcel of new shares to punch a hole in Zip's valuation. The laws of supply and demand do dictate that increased supply results in lower pricing, after all. But today's new shares evidently haven't had much of an impact on the Zip share price, since the company initially opened in the green. That is understandable, seeing as investors have had weeks to digest this news.
However, we can't escape the fact that Zip is today treading at just a whisker off its 52-week low of $1.40 a share right now.
2022 has been something of a horror year for the Zip share price. This company assumed the mantle of the ASX's largest BNPL share in January after the acquisition of Afterpay by Block Inc (ASX: SQ2). But even so, Zip shares have now fallen more than 67% year to date alone. Over the past 12 months, the company has given up a nasty 82.9% or so of its value.
At the current Zip share price, this ASX BNPL share has a market capitalisation of just over $950 million.
