Zip share price surges; dual listing rumours emerge

The Zip share price rose firmly on Monday, as speculation mounts over a possible US listing.

Zip share price surges on US hope

The Zip (Z1P) share price was up 7.03% to $9.29 per share by 11:07AM on Monday, as news begun to circulate that the company’s management was on a US investor roadshow. Speculation that Zip is considering a dual listing in the US also emerged.

The payments company has indeed been gaining more media attention of late, with the company reporting a stellar set of quarterly results in late January. Those results have led to an increased focus on valuations, with Zip’s Co-founder – Peter Gray – recently telling the Australian Financial Review (AFR), that:

‘Our view would be on the revenue multiples we're significantly undervalued when directly compared to Afterpay and obviously Affirm.’

Mr Gray further told the AFR that:

‘Even if you looked at us as a direct comparison to Sezzle, we would appear undervalued, and I think that one of the opportunities for us as we go to market this year is to bridge that valuation gap.’

As we wrote last week, in an article covering Bell Potter’s $168 price target on Afterpay – there is indeed a significant valuation gap between the market leader (Afterpay) and the likes of Zip and Sezzle. Whether that valuation gap will widen or close though, remains impossible to say.

Despite that valuation gap, Zip has delivered strong growth in recent times. As part of the company’s Q2, Zip reported quarterly revenue of $102.0 million, annualised revenues of ~$480 million, quarterly transaction volumes of $1.6 billion, and customers of 5.7 million.

Elsewhere, Zip’s recent QuadPay (Zip US) acquisition has already shown strong results. As part of the Q2, management noted that QuadPay notched up transaction volumes of $673.1 million, revenues of $47.6 million, while adding 915 thousand fresh customers.

Commenting on these developments at the time, Zip’s CEO, Larry Diamond said:

'A number of strategic initiatives were delivered during the quarter, in line with our mission to become the first payment choice everywhere, every day, and we are extremely well placed to continue this momentum into 2021 as the global shift away from the broken credit card model continues.’

'Particularly exciting were the results achieved in the US with Quadpay rapidly accelerating in the largest addressable market for BNPL,’ Mr Diamond elaborated.

Rumours abound as Zip hunts growth

As noted at the start and with the company releasing no new material or price sensitive information itself, today’s share price rally may very well have been driven by the AFR’s Street Talk column which focused on a possible US listing.

Centrally, the AFR reported that Zip was going on a US investor road show as a means of drumming up international support for the company. The newspaper described the reason behind the US trip as follows:

‘Zip wants to tell its story and go shopping for new investors in what’s about to become its biggest market.’

Looking at the possibility of a dual listing, the AFR said its sources note that:

‘Zip is considering issuing American Depository Receipts that would mirror shares in the company, trade in the US and give the company greater access to US capital markets.’

The US has indeed shaped up as the key battle ground for ASX-listed BNPL companies over the last year, with Afterpay, Sezzle and Zip all hotly engaged in expansion activities in that region.

Investors look evidently excited at such a prospect: By 1:37PM the stock was up 14.06% to $9.90 per share.

Zip has not officially commented on the above discussed speculation.

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