The Zip share price is plunging 9% today. Here’s why

Zip shares are getting smashed today. Here’s why.

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It’s been another bumpy day for ASX shares so far this Wednesday. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) is down by a paltry 0.06% after spending most of the morning in green territory. But the Zip Co Ltd (ASX: ZIP) share price hasn’t been nearly as fortunate.

As it currently stands, Zip shares are down by a rather horrible 9.35% at just $1.05 a share. That’s just a whisker off of the company’s 52-week low of $1.

This latest plunge now means the ASX’s largest buy now, pay later (BNPL) share has lost a staggering 75.8% over 2022 thus far.

So what’s causing Zip’s decisive plunge today?

Zip share price plunges amid escrow release

Well, it’s likely to be the ASX announcement the company put out this morning before market open. In this announcement, Zip informed investors that a large volume of shares will be steadily released from voluntary escrow. This will all occur over the next month or so.

Around 7.46 million shares will be released on 12 May. Following this, another 1.5 million or so shares will leave escrow on 23 May. The final tranche of 13.2 million shares is to be released on 1 June.

These tranches of shares correspond to the scrip the company paid for the acquisitions of Twisto Payments, Spotii Holdings and QuadPay Inc respectively.

So it’s very possible that investors are worried that the release of such a large volume of shares will result in a sustained period of selling pressure on the Zip share price. After all, Zip has fallen by such a large margin over 2022 thus far. As such, there’s a fair chance that many of the investors holding these shares will opt to cash them out once they are out of escrow.

So this could be why the Zip share price is plunging today. 

At the current Zip share price, this ASX BNPL share has a market capitalisation of $791.47 million. 

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in 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 Scott Phillips.

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