Since July report, people have overlooked the market which BNPL operates and focussed on the numbers of “growth” and what they perceive as “growth”. Many warnings have been ignored.
for me it was very obvious that troubles were ahead, and timing was always against zip, trying to be relevant, rebrand, expand, and entice investment, all on a weak balance sheet and into heavier inflation and higher interest rate risk environments. It appears Zip (without the guidance, support and backing of required funds and instos) tried to go it alone, be used anywhere, and have to pay substantially more to market and promote their business than if they were to obtain meaningful partnerships.
The main concerns for me, in addition to the above, was that Zip tried to raise money early this year via Wells Fargo, and came back with an increased holding from BoA. More acquisitions with minimal cash (used to grow top line), and resulting in more dilution of shares
Zips major competitors share register is packed full of funds, instos and specialist tech capital, most of which has not been seen on zip.
Westpac selling their 10.7% earn last year at nearly $7, sighting more efficient use of capital, turned out to be a good decision by them.
Things like the second cap raise, the timing of the rebrand(more cash pressure), the failure to address various rumours, the inflation, macro and geopolitical factors, the failure to announce Australia Microsoft and other deals, have added to the sentiment and downward pressure
The volume which affirm, Klarna and Afterpay continue to grow at compared to zip, who’ve had 3 consecutive U.S. slowed quarters, is also very critical. Doing too much, too soon, and without the same amount partners or support to get there that our competitors have had, has also added to downward pressure.
Coincidental or not, Citi sighting zips US website visits down by more than half in August from July (mindful they zip US had already had 2 previous consecutive slowed quarters), was enough reason for me to exit pre last report. The range it traded and dried up volume didn’t seem to support any breakouts or “hidden news” . US was the golden cow, which seems to have belted around since zip overtook quadpay. Why not leave quadpay to do what they do, why rebrand quickly and why keep putting more cash pressures on the business and shareholders.
The markets have had nearly one or two technical corrections each year for the past 5 years, and zip is not insulated from the downside market risks.
IMO shorter term risk (which is a critical one), is zip HY report showing huge cash burn and eye watering expenses, while showing potential of a cap raise risk post current notes expiring,
Klarna, Affirm and Square/APT have the support, balance sheet and cash position to really drive zip and others out of the market, even at a loss, to continue the strangulation of their market share, offering larger margins to their vendors.
Like a clock, profit taking ensues, market conditions continue to worsen as more and more money cycles away from overvalued growth and tech, interest rates are going up earlier than expected across the board, and now zip will continue to languish, hoping for a catalyst before another raise potentially comes.
any more acquisitions or raises at these levels, could potentially present a very dire situation imo
all imo, and why I went from bullish, to neutral and then to bearish.
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