Why are Zip shares in a trading halt?

Zip shares won't be going anywhere on Thursday. What's happening?

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A woman crosses her hands in front of her body in a defensive stance indicating a trading halt.

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Zip Co Ltd (ASX: ZIP) shares won't be going anywhere on Thursday.

That's because the buy now pay later (BNPL) provider has requested a trading halt.

Why are Zip shares halted?

This morning, Zip requested that its shares be placed into a trading halt until the earlier of the release of a particular announcement or the commencement of trade on Tuesday.

According to the release, the trading halt will allow the company to undertake a capital raising and liability management exercise. The request states:

[T]he Company advises that: (a) the trading halt is requested as the Company is undertaking a capital raising and liability management exercise (Transaction); (b) the Company wishes the trading halt to remain in place until the Company releases an announcement in relation to the Transaction, or the commencement of normal trading on Tuesday, 13 June 2023, whichever is earlier; (c) the Company is seeking the trading halt to assist in managing its disclosure obligations and maintaining an orderly market in the trading of the Company's shares, and to ensure that trading does not take place in an uninformed market; (d) the Company expects that the trading halt will be ended by it making an announcement to ASX in relation to the Transaction.

What's happening?

Unfortunately, Zip has not revealed how much capital it is seeking to raise. Nor has it advised at what price it is aiming to raise the funds.

It is also unclear exactly what the company means by "liability management exercise." However, traditionally, a liability management exercise is undertaken to replace shorter-term liabilities with longer-term liabilities.

We'll have to wait and see what Zip announces in the coming days.

Motley Fool contributor James Mickleboro 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 Zip Co. 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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