The Zip Co Ltd (ASX: ZIP) share price is under pressure on Tuesday morning.
At the time of writing, the buy now pay later (BNPL) provider's shares are down 8% to 65.5 cents.
This latest decline means the Zip share price is now 85% in 2022.
Why is the Zip share price falling?
Investors have been selling down the Zip share price today after the company announced a surprise capital raising.
According to the release, Zip has raised $13.6 million from institutional investors at a 13.2% discount of 62 cents per new share. The proceeds will be used to fund the conversion of some of its notes earlier than planned.
Zip's co-founder and COO, Peter Gray, explained:
In recent months, Existing Noteholders have contacted the Company interested in selling back a portion of their holdings at prices that may be attractive for Zip. As a result, we are pleased to launch this liability management exercise. This initiative will proactively manage our debt maturities by retiring a portion of our liabilities at a fraction of face value, as well as offering Existing Noteholders a liquidity opportunity. If completed, the transaction is expected to be cash neutral for the Company and accretive to Zip shareholders.
Trading update
Failing to stop the Zip share price from falling today was the release of a trading update.
According to the update, the company is performing in line with expectations in the current financial year and continues to expect to deliver positive cash EBTDA during the first half of FY 2024. It also doesn't expect to need to raise capital before then.
Management commented:
Zip reaffirms the comments provided to the market at its Annual General Meeting on 3 November 2022. The Company is on track to deliver positive cash EBTDA as a group in the first half of FY24. The Company continues to make progress with its rest of world strategic review, which it expects to deliver cash inflows or a neutralising of cash burn in each of its non core markets during the second half of FY23.
The quarter to date has delivered business performance and cashflows in line with seasonal trends and expectations. Zip remains confident it has sufficient cash and liquidity to support the Company through to positive cash EBTDA in the first half of FY24.
