Afterpay & Zip share prices: why BNPL funding is skyrocketing

As companies in the buy now pay later space rush to raise funds, we examine the details behind the latest capital raises from Afterpay and Zip.

Indeed, there's been quite a funding frenzy for some of Australia’s highest profile buy now pay later (BNPL) companies in the last few weeks. With Sezzle just yesterday finalising a new US$100 million debt facility, we’re now looking at more than $400 million in funds being thrown around – in the last month alone.

Afterpay (ASX: APT), Zip (ASX: Z1P) and now Sezzle (ASX: SZL) have all tapped the markets to raise new funds. To read more about Sezzle’s just-completed funding facility – click here now.

Ultimately, one needs only a cursory glance of the key data points behind the BNPL sector to see what’s driving this funding spree. In Zip’s latest investor presentation, for example, the company defined the global BNPL opportunity across multiple geographies: Australia had an implied value of $320 billion, the United States $5 trillion, the UK $630 billion and New Zealand $96 billion.

This opportunity, as it would seem, is too big for these growth hungry companies and prospective investors to pass up.

With such lofty figures in mind, we take a look at the equity raises recently pursued by two of the ASX’s most prominent BNPL stocks – Afterpay and Zip.

Afterpay share price: a $200 million raise

As part of Afterpay’s (ASX: APT) latest business update, released in mid-November, the company announced that it was pursuing a $200 million capital raise, via a private placement with the US-based, tech-focused Coatue Management.

Promisingly for investors, the company announced last Friday 'that it has successful completed the private placement to US based technology investor Coatue Management of 7,017,544 fully paid ordinary shares at a price of $28.50 per share.'

The Afterpay share price has hovered above that fresh issue price in the last few sessions and currently trades $30.43 per share – even as volatility grips global markets.

Besides the capital raised from this Private Placement, it was also pointed out that both companies have agreed to form a 'strategic parternship where Coatue will leverage its data science expertise to support Afterpay in its development of retail data analytics and future data driven products.’

The companies will also collaborate 'on tools and capabilities' to pursue Afterpay's more existential ambition of being the 'world's most loved way to pay.'

Zip share price: a $60 million raise

Zip (ASX: Z1P) also recently announced and promptly completed a capital raise of its very own, with the funds earmarked for global expansion.

Though Zip first announced that it would be looking to raise $50 million from institutional, sophisticated and professional investors, the fast-growing company bumped this amount up to $60 million – as investor demand exceeded previous expectations.

As a result of this cap raise, Zip will issue 16,216,216 new ordinary shares, at a placement price of $3.70 per share. The settlement of these new shares under the placement is expected to take place tomorrow, Wednesday, December 4.

Speaking of this now-completed capital raise from institutional investors, Larry Diamond, Zip's Managing Director and Chief Executive Officer said:

'The Additional equity capital will support the launch and growth of Zip's UK operations, the roll-out of Zip Biz, increased investment in product, technology and data sciences as well as strengthening the Company's balance sheet – helping us continue delivering outstanding results for our shareholders.'

In the wake of this, the Zip (ASX: Z1P) share price has fallen – and though at first this was likely due to the capital raise – today’s decline, which saw the stock drop a further 1.2% – would assumedly be related to broad market weakness.


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