Zip regains unicorn status as investors back restructuring plans

Australian buy-now pay-later (BNPL) firm Zip Co (ASX: ZIP) is once again a unicorn after the company’s share price nearly doubled over the last five days, pushing its market capitalisation above $1 billion for the first time since April.

While ZIP shares remain down 49.32 per cent on a six monthly basis, the recent shot in the arm sees the company return into investor’s good books following a trading update last week.

That announcement saw the firm detail its restructuring plans, which will involve Sydney-based Zip exiting a number of non-core businesses, including its business finance arm Zip Business, in order to reduce cash burn and right-size its global footprint.

As such, shares in Zip are up more than 20 per cent today to $1.48 per share. Over the past five days, shares have spiked by more than 92 per cent, and in the past month by more than 210 per cent.

Clearly, investors like what they see when it comes to Zip’s plans. The strategy is intended to make the company profitable eventually and decrease global people costs by $30 million in FY23.

In addition to dumping Zip Business, the company will also exit its Singaporean business by September, ditch its product suite of Trade and Trade Plus, and retire personal finance app Pocketbook which it acquired in 2016.

Previously planned new financial services products, including crypto and investment products, have also been “deprioritised” under the strategy.

While the recent spike officially marks Zip being re-knighted as a unicorn, the company’s share price is still well off historical highs achieved in early-2021, when shares traded at $12.35 per share.

The spike also follows Zip’s decision to terminate its proposed acquisition of US BNPL competitor Sezzle (ASX: SZL), demonstrating investor appetite for a leaner ZIP.

That deal was dumped by mutual agreement, with the two blaming unfavourable market conditions at the time. When the merger was announced in late-February, Zip shares fell from about $2 per share to just 50 cents at the close of trade on 11 July.