Zip (ASX:Z1P) stock price stalled after earnings announcement, capital raise and Sezzle acquisition

the Zip Co Ltd (ASX: Z1P) stock price will go nowhere today.

This morning, provider Buy Now Pay Later (BNPL) released its half-year results and requested a halt to trading.

Zip stock price halted in fundraising

• Transaction volumes up 92% over the prior corresponding period to reach a record $4.5 billion
• The number of transactions increased by 147% to reach a record 36.3 million
• Revenue up 89% to $302.2 million
• Cost of sales up 192.5% to $242.2 million
• Gross profit down 23.2% to $59.1 million
• Pre-tax loss of $214.2 million

What happened during the first half?

Consistent with its pre-released half-year results, Zip saw a 92% increase in trading volume to $4.5 billion and an 89% increase in revenue to $302.2 million.

Management disclosed that this was due to growth across all geographies, supported by customers continuing to benefit from products such as Tap and Zip, and deepening engagement through initiatives such as Zip’s personalized rewards offering.

According to his previous update, things weren’t so positive for his earnings. Due to a significant increase in its cost of sales, Zip reported a 23% decline in gross profit to $59.1 million and an after-tax loss of $214.3 million.

Zip stock price halted

Since Zip’s results were released ahead of time, investors’ main goal is likely to be a break in Zip’s stock price.

This morning, the company requested a stop so that it could undertake a fundraising of 198.7 million dollars. This includes a fully subscribed institutional placement to raise $148.7 million and a $50 million stock purchase plan.

Zip is raising funds at $1.90 per share, which represents a 14% discount to Zip’s stock price at the close of play on Friday.

Why is he fundraising?

Zip launched its fundraising after announcing a deal to acquire rival supplier BNPL Sezzle Inc. (ASX: SZL).

And while the funds will not be used to acquire Sezzle, management intends to use the additional capital to support its growth and realize potential synergies from the transaction.

Acquired Sezzle

Zip has signed an agreement to acquire Sezzle for consideration of 0.98 Zip shares for each Sezzle share.

Based on Zip’s current share price of $2.21, this implies a price of $2.1658 per Sezzle share, representing a premium of almost 22%. He also values ​​Sezzle at around $491 million.

Zip Co-Founder and Global CEO, Larry Diamond said, “We are excited to bring Zip and Sezzle together in a transformational transaction that is expected to deliver immediate scale and increased growth, which will support our path to the profitability. The association with Sezzle positions us as one of the leading global suppliers to BNPL and prioritizes our ability to win in the important US market,”

“Pete and I knew Charlie [Youakim] and paul [Paradis] (co-founders of Sezzle) for some time, and we’ve been impressed with what the Sezzle team has achieved. Their responsible lending, Sezzle Up credit building program, and B Corp certification are to be admired. We are thrilled to welcome the entire Sezzle team on our journey as we continue our mission to be the first payment choice, everywhere, every day,” he added.

Subject to approvals, Zip expects the transaction to close by the end of the third quarter of calendar year 2022.