Zip Co to raise $60 million for global expansion and SME business

Zip Co to raise $60 million for global expansion and SME business

Buy-now-pay-later (BNPL) company Zip Co (ASX: Z1P) entered a trading halt this morning before announcing a $60 million capital raising, issuing new shares at a 5.6 per cent discount to the last trading price.

The group led by Larry Diamond (pictured) plans to use the funds to bolster global expansion in the UK; a move made possible by Zip Co's $48 million acquisition of New Zealand-based PartPay with operations in the United Kingdom, United States and South Africa.

The Sydney-headquartered company also intends launch and accelerate the growth of Zip Biz, a BNPL solution for small businesses.

In addition, the funds will be used to support increased investment in product and technology, as well as improving the company's balance sheet.

Zip Co had a cash balance of $76.3 million at the end of FY19, while on 26 August it completed a "landmark" debt funding deal backed by National Australia Bank (ASX: NAB) worth $500 million.

The raising will take place through a placement of 13.5 million new shares valued at $3.70 each to raise $50 million, followed by a share purchase plan (SPP) to be capped at $10 million.

The placement is expected to be settled by 4 December with the SPP offer to open two days later.

Like many players in the booming BNPL space that are focused on growth to capture market share, Zip Co continues to run at a loss and its revenue ($84 million in FY19) is dwarfed by the size of its market capitalisation ($1.46 billion).

This revenue however represented a growth rate of 108 per cent and the company now has more than 16,000 retail partners on its books and 1.3 million active customers.

In its AGM presentation, the company noted the median age of its consumers was 34 with an average order value of $217. Around 63 per cent of customers who use Zip are female, while the split between online and offline is 68:32.

"With Australian customers proving the Zip proposition, customers in New Zealand, and the UK will soon be able to experience Zip for themselves," the company noted.

"An increasing number of integration partners such as Adyen, BigCommerce and Tyro deepen Zip's presence in the payment ecosystem.

"Each integration partner accelerates acceptance, unlocking new and increased value."

Zip Co also made its second acquisition in New Zealand in September with the purchase of Spotcap for $8.83 million, and earlier this month it signed on Amazon Australia as a new partner.

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