The Sezzle Inc (ASX: SZL) share price has returned from its trading halt and dropped into the red.
In afternoon trade, the buy now pay later (BNPL) provider’s shares are down 3% to $1.70.
Why was the Sezzle share price in a trading halt?
The Sezzle share price was placed in a trading halt yesterday after the BNPL provider received a takeover proposal from rival Zip Co Limited (ASX: Z1P).
As we have previously covered here, Sezzle has agreed to an all-scrip deal that will see shareholders receive 0.98 Zip shares for every Sezzle share owned.
Based on the Zip share price at the time of the offer, this implied a price of $2.1658 per Sezzle share, which represented a premium of almost 22% to Sezzle’s last close price and valued the company at $491 million.
Sezzle’s Co-Founder, Executive Chairman, and CEO, Charlie Youakim, spoke very positively about the agreement.
He said: “We are extremely excited about the opportunity to create a leader in the financial services industry by combining with Zip and its management team led by Larry [Diamond] and Pete [Gray]. Paul [Paradis] and I believe it will be a great cultural fit for both our organisations and we’re excited to be part of Zip’s next chapter. I believe the transaction will position us to win in the U.S. and globally.”
So why are its shares falling?
When a company receives a takeover proposal, you’ll normally see its shares shoot higher. But this hasn’t happened with the Sezzle share price today, which may have caught some investors off guard.
As you may recall with the Block Inc (ASX: SQ2) acquisition of Afterpay, when a takeover proposal is an all-scrip affair, the value of the proposal rises and falls with the suitor’s share price.
So, with the Zip share price tumbling notably lower today following the completion of a ~$150 million institutional placement, the deal is already becoming less attractive to shareholders.
At present, the Zip share price is fetching $2.00. Based on its offer of 0.98 shares per Sezzle share, this now values the transaction at $1.96 per share, instead of ~$2.17 per share previously.
And while this is still meaningfully higher than the current Sezzle share price of $1.70, it appears that the market doesn’t have a lot of confidence that Zip’s shares have found a bottom just yet. Furthermore, both sets of shareholders have to approve the proposal, so it’s not quite a done deal at this stage. As a result, some form of discount has to be applied to reflect this risk.
The post Why is the Sezzle (ASX:SZL) share price falling following Zip’s takeover offer? appeared first on The Motley Fool Australia.
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More reading
- ASX 200 (ASX:XJO) midday update: Zip shares tumble, AUSTRAC takes aim at Crown
- Why is the Zip (ASX:Z1P) share price sinking 11% today?
- These were the worst performing ASX 200 shares in February
- 5 things to watch on the ASX 200 on Tuesday
- ASX 200 (ASX:XJO) midday update: Zip to buy Sezzle for $491m, GrainCorp storms higher
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Block, Inc. and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended Block, Inc. 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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