Hey mate I’m not too sure on the specific entities, but for me there are a number of different themes we might see play out in terms of a merger, similar to APT/SQ:
1) BNPL merger - a lot of talk about Klarna, but I actually think Affirm would be a more appropriate fit to buy out Zip. When you think about what it would give them - a strong Pay-in-4 player to compliment their longer-term offerings, strong international exposure to compliment their predominantly US operations, and a very very cheap valuation (in AUD also) that could potentially be bought with stock as they’re publicly listed. I’ve never been convinced on the Klarna story and I think the market has decided that was also likely a second fluff piece from the AFR
2) Payments processor - e.g. Stripe/PayPal - potentially, but I’m not entirely sure why - Afterpay would be the logical choice for them as it was eating into PayPal’s transactions and Stripe is prob still growing too fast. The thing here is whether processors want to take on credit risk - PayPal have shown they do so I suppose it’s a possibility.
3) Credit card provider - e.g. Amex or Diners - this one could make sense in that these older brands may want to buy the emerging companies in the BNPL space and run them as separate entities so as to not muddy the brands. The issue of course is that the BNPL companies throw so much sh*t at credit cards I don’t know how such a merger would possibly work. Sezzle/Discover is a good example of this, but SZL are far less critical of credit and credit products in their commentary.
4) Banks - similar to the above, you may see a bank wanting to pick up a fast-growing BNPL business, but the synergies are tricky - for the bank it makes sense to try and then promote new products to the BNPL user base, such as with SZL/Discover, but Zip seems to have a very negative view of banks and I don’t see how it would work for them.
Zip is currently at a very attractive price to do a good deal with someone - I just hope their somewhat immature commentary about credit and finance products don’t leave them dancing alone.
Z1P Price at posting:
$6.90 Sentiment: Hold Disclosure: Held
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