The Zip Co Ltd (ASX: ZIP) share price is lifting off today.
Shares in the All Ordinaries Index (ASX: XAO) buy now, pay later (BNPL) stock were in a trading halt yesterday after closing up 1.9% on Tuesday at $1.605 a share.
In morning trade on Thursday, Zip shares are back in action. They are currently swapping hands for $1.738 apiece, up 8.3%.
For some context, the All Ords is down 0.1% at this same time.
Here's what's happening.
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ASX BNPL stock lifts as debt slate to be wiped clean
The Zip share price was frozen yesterday after the company released its quarterly results and announced its intention to raise $217 million via a fully underwritten equity placement. Zip is also offering eligible shareholders the opportunity to take part in a non-underwritten share purchase plan, aiming to raise another $50 million.
The company plans to use the $267 million in new funds to improve its balance sheet and pay off hundreds of millions of dollars in debt. Management said this would enable greater flexibility to pursue growth ambitions, with one eye on expanding operations in the lucrative US markets.
Today, the Zip share price is charging higher after the company said it had successfully completed the $217 million (before costs) equity placement. The funds are earmarked for the early repayment of Zip's existing corporate debt facility and associated exit fee. That's expected to happen as soon as Monday, 22 July.
All told, the BNPL company issued some 139.1 million new shares under the placement. The final issue price, determined via a bookbuild process, came out to $1.56 a share. That's 2.8% below Tuesday's closing price. But notably it's 2.6% more than the underwritten floor price of $1.52 per new share.
Commenting on the successful capital raising boosting the Zip share price today, CEO Cynthia Scott said, "We are delighted with the extremely strong support we have received from high-quality existing and new shareholders for the placement."
Scott added:
This is a strong endorsement of our strategy, and we thank our existing shareholders for their ongoing support and welcome our new shareholders to Zip.
The placement will enable Zip to repay its existing corporate debt, optimise our capital structure and provide Zip with greater flexibility for future growth.
What's ahead for the Zip share price?
With today's intraday gains factored in, the Zip share price is up 304% in just 12 months.
But RBC still sees significant upside potential from here. According to data from The Australian, the broker raised the ASX BNPL stock to an 'outperform' rating with a $1.90 price target. That represents a potential 9% upside from current levels.
