You can read more about the acquisition here.
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.
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%).
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