Zip share price crashes, ASX queries bullish price action

Zip finished Wednesday's session down 14.01% following an impressive run over the last month.

After a furious run over the last month, the Zip (Z1P) share price crashed sharply on Wednesday, hitting an intraday low of $11.27. While the stock recovered somewhat by the afternoon session, it remained down over 10%.

Financial markets are deeply complex systems that often move in inexplicable ways. Humans after all, are not rational creatures. And when money is involved, they can become even more irrational.

Zip, for whatever reason, has caught the eye of investors and traders recently. Despite today’s sell off – it’s still up over 100%. As we discussed at length yesterday, there are fundamental reasons behind this run: the Q2 update was strong and investors seemed to receive it positively.

At what point does a positive reception become a problem?

Well, the Australian Stock Exchange (ASX) was keen to get to the bottom of what’s behind the recent share price run – yesterday issuing the company with a price query.

Zip share price: Anatomy of an ASX price query

Taking one step back, the ASX will often issue price queries – colloquy referred to as ‘speeding tickets’ – when a stock exhibits abnormal price moves. This is typical for microcaps, which are prone to experiencing volatile price swings, both up and down. Zip though is hardly a microcap, boasting a market cap close to $7 billion – after today’s sell down.

On a theoretical level, As Capital Markets CRS plainly puts it:

‘There are two possible explanations for an abnormal price change: 1. It was an anomalous movement, or 2. It was driven by an investor’s information advantage.’

Centrally, Zip’s response to the ASX price query suggests there’s no reason to believe it was point two, but rather the recent share price run is merely an ‘anomalous movement’.

As part of its response, Zip's management team reiterated their compliance with ASX listing rules, while saying that 'the company is not aware of any information concerning it that has not been announced to the market which, if known by some in the market, could explain the recent trading in its securities.'

Indeed, Zip flagged three more things which have likely contributed to the bullish price action of its stock in the last month.

First, the company noted the general optimism which the market has had for BNPL stocks in general. Indeed, while true that Zip has performed strongly in recent times, Afterpay and Sezzle, for example, have also seen strong share price gains, with both up significantly in the last year. It should also be noted that Zip continues to trade on a lower price to sales ratio of both those companies.

Finally, Zip also pointed to its successful placement, share purchase plan and solid Q2 trading update as factors which may have contributed to its recent share price run.

Zip finished out the session down 14.01% at $11.97.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.