This major US bank has bought 6% of Zip (ASX:Z1P) shares

Bank of America (NYSE: BAC) has been slowly accumulating Zip Co Ltd (ASX: Z1P) shares since 31 December 2020.

On Monday, Zip announced the new substantial holder, which has now acquired a significant 34 million shares, or 6.15% of the company. 

Banking giant is now a Zip shareholder 

Bank of America is one of the world’s top ten largest banks, servicing individual consumers through to large corporations with a full range of banking, investment, asset management and other financial and risk management products and services. 

The bank boasts a market capitalisation of approximately US$336 billion (A$432 billion), or just shy of three times the value of Commonwealth Bank of Australia (ASX: CBA). 

Yesterday’s substantial shareholding hasn’t just come out of the blue. 

Zip engaged with Bank of America as its financial adviser and placement agent for its transformational QuadPay acquisition. The banking giant has also assisted Zip with its recent $400 million convertible bond raising. 

What does this mean for the Zip share price? 

Zip disclosed its mandatory substantial holding announcement yesterday as is required by the ASX. Investors appeared ambivalent to the news with the Zip share price falling 4.5% during Monday’s session. What the investment means for the Zip share price longer term remains to be seen.  

Disclosure of Zip’s new substantial shareholder might take some investors down memory lane – when Chinese internet giant Tencent bought 5% of Afterpay Ltd (ASX: APT) back in May 2020. This resulted in the Afterpay share price surging some 28% on the day of the announcement. 

The key difference here is that Afterpay formally acknowledged and welcomed the new shareholder, which it said provided significant learning opportunities for the BNPL provider: 

We feel very privileged to welcome Tencent as a substantial shareholder in our business. Being able to attract a strategic investor of this calibre is extremely rewarding and is a testament to our team and the strength of our differentiated business model.

Tencent’s investment provides us with the opportunity to learn from one of the world’s most successful digital platform businesses. To be able to tap into Tencent’s vast experience and network is valuable, as is the potential to collaborate in areas such as technology, geographic expansion and future payment options on the Afterpay platform.

To date, Afterpay has yet to announce any formal collaboration with Tencent. But the announcement clearly had investors excited for what could happen next. In contrast, Zip has updated the market on its latest substantial shareholder with little fanfare.  

However, Bank of America’s substantial shareholding could arguably further rumours of Zip’s potential secondary listing in the United States. 

More reading

• Why the Afterpay (ASX:APT) share price is in focus
• 5 things to watch on the ASX 200 on Tuesday
• Why GPT, Mayne Pharma, Talga, & Zip shares are tumbling lower
• Top broker picks ASX shares next in line for a profit upgrade
• Up 25% this month, is the Afterpay (ASX:APT) share price a buy?

Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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