Zip share price jumps 6% after merger deal with Sezzle is cancelled

The Zip share price is having a good day.

| More on:
woman using affirm to pay

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Zip shares are exploding today 
  • The Buy Now Pay Later company has mutually agreed with Sezzle to cancel a proposed merger 
  • Zip will pay Sezzle $11 million for costs 

The Zip Co Ltd (ASX: ZIP) share price is soaring today amid the termination of a merger with Sezzle.

Zip shares are currently trading at 55.25 cents, a nearly 11% gain. Meanwhile, Sezzle Inc (ASX: SZL) shares are plunging more than 33% at the time of writing. For perspective, the S&P/ASX 200 Index (ASX: XJO) is climbing 0.53% today.

Let’s take a look at what is going on at Zip.

Merger agreement terminated

Zip and Sezzle have mutually agreed to cancel their plan to merge. Zip originally announced its intention to acquire Sezzle on 28 February for about $491 million.

The Buy Now Pay Later (BNPL) company will now pay Sezzle $11 million to cover costs, including legal and accounting.

Zip highlighted it remains focussed on its strategic plan and returning to profit by the 2024 financial year.

Commenting on the news, Zip board chair Diane Smith-Gander said:

We believe that mutually terminating the merger agreement with Sezzle at this
time is in the best interests of Zip and its shareholders, and will allow Zip to focus
on its strategy and core business in the current environment

Zip reiterated today that its business ‘remains strong’ and it is continuing to see customer and transaction growth. The company highlighted that the US market is a “significant opportunity” and its core market. In a statement, Zip added:

Zip is well capitalised to execute on its strategy and in line with previous guidance, Zip continues to expect to deliver group profitability during FY24.

Some experts had expressed concern about the proposed merger in recent times. For example, as my Foolish colleague Sebastian reported in May, East 72 founder Andrew Brown said: “Zip should not buy Sezzle, it should pay the fee and walk away”.

Zip share price snapshot

The Zip share price has plunged 83% in the past year, while it has fallen nearly 78% year to date.

In the past five years, Zip shares have fallen around 18%.

In contrast, the benchmark ASX index has fallen about 9% in the past year.

Motley Fool contributor Monica O'Shea 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.

More on BNPL shares

A man and a woman sit in front of a laptop looking fascinated and captivated by ASX shares news articles especially one about the Bannerman Energy share price
BNPL shares

Sezzle sizzles: What is going on with this ASX buy now, pay later share?

Sezzle shares are setting new standards for volatility today.

Read more »

Scared looking people on a rollercoaster ride representing the volatile Mineral Resources share price in 2022
BNPL shares

The big dipper: Zip share price dives 24% in wild end-of-week ride

The BNPL company's shares have been all over the place this week...

Read more »

A man reacts with surprise when her see a bargain price on his phone
BNPL shares

Sezzle share price jumps 46% on Q2 update

Sezzle's shares are rocketing again on Friday...

Read more »

Happy man doing online shopping.
Share Gainers

Sezzle share price surges another 40% following speeding ticket response

Sezzle shares have lift off after the company's replied back to the ASX's price query.

Read more »

Happy woman shopping online.
Share Gainers

Why did ASX buy now, pay later share Laybuy just rocket 95%?

Why are BNPL shares like Laybuy rocketing this week?

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price
BNPL shares

Zip share price rockets again and is now up 225% in four weeks

Zip shares are rocketing again on Thursday...

Read more »

Happy man paying using a BNPL service.
BNPL shares

Here’s why the Block share price is charging higher today

Tech shares are leading the charge higher today following a strong lead in US markets, buoyed by some dovish words…

Read more »

Happy woman using a BNPL service.
Share Gainers

Why is the Openpay share price up 55% in a week?

Openpay shares have been on fire in the past week.

Read more »