Today, Zip has a big position in Australia as the No. 2 player, but it’s the US market where it’s really focused, growing its active customers base to 3.8 million. Investors are fans of new management, praising ex-Barclays Australia chief Group Cynthia Scotts’ handling of a major business shift from grabbing market share at any cost to profitable growth.
She’s also overseen a huge debt financing process, turning over $1.1 billion of receivables funding. And with the stock trading above $1, bets are being placed on whether the name, which once traded above $12, could re-enter the ASX 200 index.
The obvious play is for a larger rival like Affirm, Block (which acquired Afterpay) or Klarna to buy Zip in an attempt to consolidate the US market and drive growth.
The timing also works for a US name with the Australian dollar hitting a five-month low earlier this month. However, American players are navigating their own issues and may not necessarily be rewarded for making big M&A moves.
Bank shot
Then there are the Big 4 banks, which are no stranger to BNPL:Commonwealth Bank (CBA) linking with Swedish outfit Klarnaand Westpac with Afterpay, in hopes of locking down the lucrative Millennial and Gen-Z demographics who have shied away from credit cards and cross-selling products like insurance and home loans.
But there are a bunch of good reasons for them to keep their distance. You don’t have to go far to find someone to dump on BNLP – either the business model or negative societal impact.
Zip is by no means a bargain-basement buy with its stock popping 126 per cent over the past six months. But withregulatory overhang subsiding, a dramatic restructuring program complete and Zip’s stock trading at a price/earnings (forecast next twelve months) discount to its larger strategic peers like Affirm and Klarna, it could make for an interesting target.
No doubt CBA’s internal M&A team adheres by its mandate of looking at all options to maximise shareholder value. As of Sunday, this was not a live deal for CBA, but still an active talking point among its shareholders.
Historically, Zip has been close to Bank of America which helped it absorb QuadPay in 2020. BofA and Jarden-Evercore were in the Zip camp for thefailed Sezzle merger in 2022.
However,Zip’s top brass have turned over sincewith co-founder Peter Gray shifting to head its Australian and New Zealand division. Co-founder Larry Diamond is heading up the US operation.Goldman Sachshas been all over its recent refinancing and fundraising efforts.
Fund managers Regal Funds Management, Ellerston Capital and Fifth Estate are on Zip’s register.
(20min delay)