Citi expects earlier-than-expected, big equity raise for Australia's Zip

Much as I predicted

Citi expects earlier-than-expected, big equity raise for Australia's Zip

10 Dec. 2020 07:31

BUZZ-Citi expects earlier-than-expected, big equity raise for Australia's Zip

** Citigroup says Zip Co Ltd may need a

sooner-than-expected equity raise, which would be larger than

the A$100 mln ($74.37 mln) the brokerage forecast for FY22

** Cites co's expansion into new markets on top of greater

marketing in existing markets for its capital needs; Cuts price

target to A$6.4 from A$6.7 could

** Citi cautions that the buy-now-pay-later firm may be

"taking on too much", given its push into the U.S. and UK as

well as the launch of other services

** As of June 30, Zip had A$32.7 mln ($24.32 mln) in cash on

its books; Citi says co has received an extra A$100 mln via

convertible notes issued to Susquehanna International Group

(SIG)

** Brokerage expects Zip's cash balance to fall to A$57 mln

by FY21-end; additional warrants with SIG and Amazon

could be other sources of funding

** Lowers its FY21 cash EBTDA forecast by A$10 mln to

account for rising spending

** Despite record November results for both companies,

Afterpay has widened the gap with Zip in recent weeks

($1 = 1.3446 Australian dollars)

Graphic: Zip underperforms Afterpay https://tmsnrt.rs/2VZEDCw

(Reporting by Nikhil Kurian Nainan)

© Thomson Reuters 2020. Click for Restrictions.