The Zip Co Ltd (ASX: ZIP) share price is taking a tumble today, down 3.7% after earlier posting losses of 5%.
Zip shares closed yesterday trading for 96 cents and are currently trading for 92 cents apiece.
So, why is the ASX buy now, pay later (BNPL) share under pressure?
Why is the Zip share price sliding today?
It's not just the Zip share price selling off on Thursday.
Following another day of losses in US markets yesterday (overnight Aussie time), and with US futures also in the red, the All Ordinaries Index (ASX: XAO) is down 2% at the time of writing.
And ASX BNPL shares are doing it even tougher, with the Block Inc (ASX: SQ2) share price down 3.1% and Sezzle Inc (ASX: SZL) shares down 4.5%.
Investors are jittery in recent days following some hawkish words by US Federal Reserve chair Jerome Powell last Friday.
Speaking at the Jackson Hole, Wyoming central banking summit, Powell said, "Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy."
Higher interest rates to combat longer-lasting inflation is broadly bad news for equity markets.
And these factors throw up some particularly strong headwinds for the Zip share price and other BNPL stocks. That's because they're already struggling with bad debts from their customers. A problem likely to be exacerbated as both prices and interest rates look set to keep marching higher in the medium term.
What else is happening with Zip today?
In a non-share price-sensitive announcement today, Zip reported it has cancelled $40 million of its $100 million Interest Bearing Convertible Notes. The notes were issued in September 2020 to CVI Investments, an affiliate of Susquehanna International Group.
As part of its ongoing liability management program, Zip paid just shy of $43 million with existing cash reserves, a sum which included accrued interest of $3 million.
Commenting on the repayment, Zip CEO, Larry Diamond said:
This payment was included in our FY23 plan and outlook recently announced to the market. As at 30 June, Zip had available cash and liquidity of $278.6 million, which is expected to be sufficient reserves to support the company through to cash EBTDA profitability in FY24.
The company also remains well placed with regards to its debt funding, with capacity of $396.9 million in Australia and US$183.1 million in the United States.
Zip share price snapshot
There's no sugar coating this one. It's been a horror year for the Zip share price, down 78% since the opening bell on 4 January. For some context, the All Ordinaries is down 11% over that same period.
