Zip merger collapses as CBA takes $2 billion from Klarna

“We believe that mutually terminating the merger agreement with Sezzle at this point 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. “, she said. Zip’s stated strategy includes growing its US customer base and achieving profitability by 2024.

Sezzle chief executive Charlie Youakim also said his group was also committed to moving towards profitability and free cash flow because that was the best outcome for shareholders.

Shares of Zip rose 5.5% to 52.7 cents in the early afternoon, while shares of Sezzle plunged 36% to 26.5 cents.

UBS analyst Tom Beedle said in a note to clients that the termination of Sezzle’s proposed merger adds more uncertainty to Zip’s outlook, but may contribute to near-term cash burn.

“Less than three weeks ago (June 22), Zip provided an update to the market noting that the acquisition of Sezzle remains on track, so we are somewhat surprised at the timing and reasoning contained in the today’s announcement.”

“With macroeconomic and market conditions cited as the reason, we believe this adds further uncertainty to the near-term outlook.”

Payments industry veteran and independent analyst Grant Halverson said Klarna’s valuation plunge and exit from Zip and Sezzle was “just another step in unwinding the BNPL bubble”. .

“BPL’s startup apps have been hit by a ‘perfect storm’ – regulation, increased competition, rising bad debt, rising funding rates and rising interest rates,” Halverson said, adding that Klarna had put four months to get his raise.

On the homegrown players, Halverson said: “Zip has finally woken up and it makes sense to pull Sezzle’s deal if they want to survive – now it’s a race to survive.”

Despite industry concerns, Klarna seemed optimistic about the future after raising $800 million, albeit at a much lower price than previous rounds.

Loading

“It was a testament to the strength of Klarna’s business that, during the steepest decline in global stock markets in more than fifty years, investors recognized our strong position and continued progress in revolutionizing the banking industry. detail,” said Klarna chief Sebastian Siemiatkowski.

A Commonwealth Bank spokesperson confirmed that the bank had participated in Klarna’s fundraising. Its stake is about 5 percent.

“Since our initial investment in 2019, Klarna has nearly tripled its global revenue, customer base and transaction volumes and now generates $1 billion in gross profit in its established European markets,” the spokesperson said.

“We also remain firmly committed to our partnership in Australia and New Zealand,” he added.

“The change in Klarna’s valuation will be reflected in CBA’s year-end accounts and will have no impact on the bank’s revenue, earnings or capital position.”

The Business Briefing newsletter features top stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

Comments are closed.