The Zip Co Ltd (ASX: ZIP) share price closed 1.37% lower at $2.16 amid 32 million new shares hitting the market today following the successful completion of an oversubscribed share purchase plan (SPP).
Although the Zip share price fell today, those SPP investors have still got to be cheering.
Here's why.
Zip share price falls but what a capital gain for SPP investors!
Eligible shareholders picked up their new Zip shares for $1.56 per share in the recent SPP.
That means that although the Zip share price finished in the red today, SPP investors have still achieved a stellar capital gain in less than five weeks!
On paper, those SPP investors have received a 38.46% capital gain on each of their new Zip shares.
This may explain why the Zip share price closed lower today.
Perhaps some of those SPP investors traded in their new stocks for a quick income boost.
Details of the SPP
The buy now, pay later (BNPL) company announced its capital raising on 17 July. It had two parts.
The first was an institutional placement that delivered $217 million in new funds to the company.
The second part was the SPP for ordinary shareholders. Zip offered the SPP at the same share price as the institutional raising, $1.56 per share. Applications closed on 14 August.
Zip was targeting an additional $50 million through the SPP. The response from Zip investors exceeded the target significantly.
On Monday, the company announced the successful completion of the SPP, with valid applications totalling approximately $85.1 million.
The Zip share price ripped to a new 52-week high of $2.30 on the news.
A total of 4,301 Zip shareholders participated with the average application amount being about $19,800.
Zip Group CEO and managing director Cynthia Scott said:
There has been a high level of demand for the SPP and I would like to thank our existing
shareholders for their ongoing support and confidence in Zip.
Zip decided to undertake a scaleback instead of keeping the extra funds.
The interests of smaller shareholders were put first, with eligible investors who applied for $1,000 of new Zip shares receiving the lot. They got 641 new Zip shares each.
Those who applied for more than $1,000 worth of Zip shares were subject to the scaleback on a pro-rata basis, depending on the size of their existing stake in the BNPL stock.
The maximum application amount was $30,000.
In a statement, Zip said it had used the proceeds of the institutional placement to repay a corporate debt
facility.
It will now use the proceeds from the SPP to help optimise its capital structure and provide additional balance sheet flexibility for future growth.
The company will issue new holding statements to shareholders shortly.
The Zip share price has skyrocketed by 250% in the year to date and is up 520% over the past 12 months.
