Over 20 million new Zip shares will soon be available to trade. What does this mean for the share price?

Could the Zip share price soon take another hit?

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Key points

  • More than 22 million Zip shares will be released from escrow over the coming weeks 
  • That means they'll be able to be traded for the first time since they were issued to fund acquisitions in 2020 and 2021 
  • If the stocks were to hit the market following their release, it could spell bad news for the Zip share price 

Three large parcels of Zip Co Ltd (ASX: ZIP) shares will soon be able to hit the market after their escrow period ends.

That means millions more shares in the buy now, pay later (BNPL) giant will be available to trade, potentially impacting their value.

At the time of writing, the Zip share price is $1.04, nearly 76% lower than it was at the start of this year.

For context, the S&P/ASX 200 Index (ASX: XJO) has slipped 5% over the same period.

Let’s take a look at why more Zip stocks are coming out to play and what that could mean for the company’s share price.

Millions of Zip shares to be released from escrow

More than 22 million Zip shares might soon flood the market after they are released from voluntary escrow agreements.

Escrowed shares are normally issued as part of a capital raise or acquisition. They are restricted from trading for a certain amount of time after being handed out.

Three packages of Zip shares will be released from their limbo over the coming weeks. The first will be able to hit the market this week.

More than 7.45 million ordinary shares in the BNPL star will be released from escrow on Thursday.

Another second package – more than 1.5 million shares strong – will be able to be traded from 23 May.

Finally, more than 13.2 million shares will be released from escrow on 1 June.

The shares were issued to help pay for notable acquisitions undertaken by Zip over the last two years.

The first package was issued as part of Zip’s acquisition of Twisto Payments in November.

The second helped pay for the company’s purchase of Spotii in May.

The largest package was issued as part of Zip’s milestone acquisition of Quadpay in 2020.

It’s important to note the stocks’ release from escrow doesn’t mean they’ll be up for grabs anytime soon.

Though, if they are sold on-market, the rule of supply and demand suggests the Zip share price could suffer.

It’s also worth pointing out that the shares to be released from escrow were worth between approximately $3.75 and approximately $7 apiece at their time of issuance.

Thus, their owners might not be enthusiastic about selling their holdings at the current Zip share price.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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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