Zip share price falling again as market experts argue for UK and US exit

Zip is rumoured to have brought in a consultant to “consider options” for its UK operations.

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A corporate executive in a suit and wearing boxing gloves slumps in the corner of the ring representing the battered Zip share price and consideration reportedly being given to dumping the company's UK operations

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Key points

  • The Zip share price is falling again on Tuesday, down 2.83% to 52 cents 
  • The company is reportedly pondering the future of its British arm as market experts suggest the company should dump its UK operations 
  • Zip's planned acquisition of Sezzle and its US business have also reportedly faced criticism as the company battles through a tough financial landscape and a multi-month sell-off

This year has seen the Zip Co Ltd (ASX: ZIP) share price nosedive, tumbling 88% year to date.

Amid the carnage, the company is rumoured to have brought in a consultant to “consider options” for its UK business.

Experts argue Zip should retreat from both the UK and the US, as well as abandon its takeover of Sezzle Inc (ASX: SZL), according to reporting by The Australian.

At the time of writing, the Zip share price is 52 cents, down 2.83% on its previous close.

For context, the broader market is gaining today. The S&P/ASX 200 Index (ASX: XJO) is currently up 1.32% while the All Ordinaries Index (ASX: XAO) has lifted 1.35%.

Let’s take a closer look at what might be on the table for Zip’s future.

Zip share price down as company ponders future in UK

The Australian claims the company is pondering the future of its British business, as market experts voice encouragement for Zip to scale back and focus on its profitable operations, such as its Australian arm.

The article says:

Market experts believe that the road to recovery for Zip Co involves staging an exit from the US and Britain and focusing on its Australian operation, which is profitable.

This would be tough medicine for Zip, reducing its four operating platforms to one.

Zip first broke into the United Kingdom back in 2019 upon the acquisition of New Zealand-based PartPay. However, the company recently noted that, broadly outside of Australia and New Zealand, it’s not turning a profit.

Staying overseas, the same market experts have reportedly also branded Zip’s US business another dead weight. The company acquired US BNPL business QuadPay in 2020, rebranding it to Zip last year.

Zip has been operating in the US for around four years now. It has previously said its US arm was expected to follow the “glidepath” to profitability that occurred in Australia and New Zealand, which took around five years.

Furthermore, the article said:

[Another] possibility thrown around is a sale of Zip’s Australian operation, but most believe that this is the part of the operation that must be retained in a quest to return to profitability and that it needs to exit other markets.

What about the Sezzle acquisition?

The experts also think Zip should abandon its planned acquisition of Sezzle Inc (ASX: SZL), The Australian reported.

This comes as Zip faces increasing competition and regulatory oversight, as well as rising bad debts and the apparent economic slowdown.

According to its FY22 half-year results, Zip had around $2.37 billion in borrowings and just $1.61 billion in assets.

Based on today’s Zip share price, the company has a market capitalisation of just $364.6 million.

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 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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