BNPL

Zip’s Sezzle takeover too expensive: analyst

Tue 01 Mar 22, 4:44pm (AEST)
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Key Points

  • Zip and Sezzle have a 25% overlap in customers
  • Analysts question whether or not the merger benefits can be realised
  • The takeover plus $200m capital raising will dilute Zip by circa 40%

Zip (ASX: Z1P) is already facing mounting criticism for its proposed takeover of rival BNPL, Sezzle (ASX: SZL)

You can read more about the acquisition here

Initial broker thoughts

Citi flagged the merger as an expensive customer acquisition strategy that raises more questions than answers. 

Some areas of concern for the broker included: 

  • Likelihood of $40-50m transaction synergies to be realised 

  • High customer overlap (25%)

  • Introducing a fee for Sezzle users 

  • Medium term revenue yield of 6-7%

The broker maintained a neutral rating and $3.65 target price

The price target seems more like a formality given where Zip shares have come from rather than the state of the BNPL sector.

Post placement performance

Zip emerged from its trading halt this morning, raising $148.7m from institutional investors.

The placement was priced at $1.90 per share, a 14% discount to Zip's last closing price of $2.21 and represents 13.3% of the company's existing shares on issue.

Zip shares held up relatively well given the discount and size of the raising, closing -6.3% lower at $2.07.

23.6m shares were traded compared to a 20-day average of 8.7m (+270%).

ZIP Co Ltd (ASX Z1P) Share Price - Market Index
Zip 12-month share price chart

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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