The Zip Co Ltd (ASX: ZIP) share price is soaring today amid the termination of a merger with Sezzle.
Zip shares are currently trading at 55.25 cents, a nearly 11% gain. Meanwhile, Sezzle Inc (ASX: SZL) shares are plunging more than 33% at the time of writing. For perspective, the S&P/ASX 200 Index (ASX: XJO) is climbing 0.53% today.
Let’s take a look at what is going on at Zip.
Merger agreement terminated
Zip and Sezzle have mutually agreed to cancel their plan to merge. Zip originally announced its intention to acquire Sezzle on 28 February for about $491 million.
The Buy Now Pay Later (BNPL) company will now pay Sezzle $11 million to cover costs, including legal and accounting.
Zip highlighted it remains focussed on its strategic plan and returning to profit by the 2024 financial year.
Commenting on the news, Zip board chair Diane Smith-Gander said:
We believe that mutually terminating the merger agreement with Sezzle at this
time is in the best interests of Zip and its shareholders, and will allow Zip to focus
on its strategy and core business in the current environment
Zip reiterated today that its business ‘remains strong’ and it is continuing to see customer and transaction growth. The company highlighted that the US market is a “significant opportunity” and its core market. In a statement, Zip added:
Zip is well capitalised to execute on its strategy and in line with previous guidance, Zip continues to expect to deliver group profitability during FY24.
Some experts had expressed concern about the proposed merger in recent times. For example, as my Foolish colleague Sebastian reported in May, East 72 founder Andrew Brown said: “Zip should not buy Sezzle, it should pay the fee and walk away”.
Zip share price snapshot
The Zip share price has plunged 83% in the past year, while it has fallen nearly 78% year to date.
In the past five years, Zip shares have fallen around 18%.
In contrast, the benchmark ASX index has fallen about 9% in the past year.
