The Zip Co Ltd (ASX: Z1P) share price has started the week very strongly.

In early trade, the buy now pay later (BNPL) provider’s shares are up a sizeable 5% to $7.41.

Why is the Zip share price charging higher?

Investors have been buying Zip’s shares this morning following the release of an expansion update.

According to the release, the company plans to enter the European and Middle East markets after acquiring the remaining shares of European BNPL provider Twisto Payments and UAE-based BNPL provider Spotii. Zip had previously bought stakes in both companies.

Management notes that the transactions align with Zip’s global expansion plans and the rapidly accelerating global BNPL opportunity.

It also notes that, as demonstrated through the acquisition of QuadPay, Zip is building its playbook in successfully identifying, completing, and integrating strategic acquisitions. It believes that Twisto and Spotii are now well-positioned to leverage the benefits of this competency and the synergies of a truly global payments organisation.

In addition, Twisto and Spotii are already integrated into Zip’s global Single Merchant Interface (SMI), which provides merchants instant access to 11 countries across five continents.

Twisto Payments

Zip will purchase the remaining shares in Twisto that it does not already own for an amount of ~89 million euros (~$140 million). The completion of the acquisition is expected to occur in the fourth quarter of calendar year 2021.

The acquisition gives Zip access to 27 European Union (EU) countries. Given that the EU is the world’s second-largest ecommerce market with $1.1 trillion annual volume, this is a lucrative market to operate in.

The release explains that over 1 million customers have transacted on the Twisto platform, with an annual run-rate of $12 million revenue and $230 million total transaction value (TTV), and 14,000 merchants.

Flagship merchants in the region include Delivery Hero, Pizza Hut, Gap, New Balance, Yves Rocher and Under Armour. It also has a robust pipeline of sizable merchants thanks to a regional partnership with global fintech leader PayU.

Zip Co-founder and Chief Executive Officer Larry Diamond said: “The acquisition of Twisto shows our commitment to global growth and follows our ‘Coalition of Founders’ model, where we back strong founders with a shared vision and deep cultural alignment in our quest for global payments coverage. We are very much looking forward to adding this strategic geography to our growing footprint and fulfilling global merchant demand. We have been impressed by the Twisto team, their deep customer focus and product set and look forward to working closely with them to deliver on the opportunities we jointly have in front of us.”

Spotii

Zip will purchase the remaining shares in Spotii that it does not already own for US$16 million (~$21 million), implying an enterprise value of ~US$20 million (~$26 million). The completion of the acquisition is expected to occur in third quarter of 2021.

Management notes that the Middle East is one of the fastest-growing ecommerce regions globally, with online spend increasing at 25% annually.

Spotii was only founded in 2020 but has shown early traction with 650 merchants already integrated into the platform. This includes flagship regional brands such as Jashanmal and Danube Home. Total transaction volume has grown at an average of 90%+ month-on-month since inception.

Mr Diamond commented: “The Spotii acquisition is an important step in Zip’s global expansion and international strategy, with Ecommerce in the Middle East on a significant upward trajectory. We have been working with Spotii since our initial investment in December 2020 to broaden our understanding of the BNPL opportunity in the region and have a number of exciting global merchants we are looking forward to activating in the coming months. We also believe there is a large untapped opportunity to bring BNPL to emerging markets where cash on delivery remains a significant merchant challenge, and where the digitisation of retail accelerates.”

More reading

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• 2 highly rated ASX growth shares

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The AGL Energy Limited (ASX: AGL) share price could be stuck at 17-year lows for a while on speculation that it needs to desperately raise cash to complete its much-touted demerger.

The separation of its power generation and retailing businesses is a key plank of the embattled group’s turnaround strategy.

But alas, many experts aren’t convinced management can execute without a large capital injection.

Painful capital raise for the sagging AGL share price

The ideal way to get the extra cash is to do a capital raise, but such a move is unappetising after the AGL share price lost around half its value in the past year. It lost another 0.2% this morning as it traded at $8.31 – close to it’s lowest since 2004.

What’s worse is that UBS estimated AGL will need around $600 million in new cash, reported the Australian Financial Review.

That’s no small raise as the amount would represent around 12% of AGL’s current market cap.

Why AGL needs cash

AGL will need the cash for two primary reasons, according to the experts. The first is to maintain its investment-grade credit rating for both the spin-off and parent entity.

The ability for the group to hold on to its valued credit rating, which gives it access to relatively cheaper debt, is in doubt as UBS cut its wholesale power price forecasts.

This will also affect the Origin Energy Ltd (ASX: ORG) share price, but at least Origin has exposure to rising oil prices through its LNG project.

Demergers and spin-offs are an expensive business

MST Marquee analyst Mark Samter also warned that investors are overlooking balance sheet risks for the separated AGL entities, according to the AFR.

He noted that demergers are an expensive business. The Woolworths Group Ltd (ASX: WOW) split with its alcoholic drinks division Endeavour cost it $280 million. The divorce between BHP Group Ltd (ASX: BHP) and South32 Ltd (ASX: S32) was even more expensive at US$738 million.

“Now, I am sure that their adviser is absolutely chomping at the bit to raise equity for them, and if you raise at a big enough discount with a placement, maybe you can get the institutional shareholders that are so notable by their absence on their register back,” the AFR quoted Samter.

“But as always I struggle to see how these things aren’t mutually exclusive with a valuation anywhere close to the current share price.”

Uncertainty to cap the AGL share price

What’s interesting is that Samter is willing to put his money where is mouth is. He promised to take a half-page ad to apologise if AGL successfully demerged without raising capital and the combined value of the businesses exceeded AGL’s current market cap of $5.2 billion in 12 months.

AGL is expected to provide details on the structure and timing of the demerger by June 30.

In the meantime, it’s hard to see the AGL share price making any meaningful recovery with this cloud over its head.

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• 2 ASX dividend shares that could offer yields of 5% or more today

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More reading

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• AGL (ASX:AGL) may need a ~$600m capital raise to complete demerger
• Are you more optimistic when the share market rises? Well, stop it
• The Euro Manganese (ASX:EMN) share price is in focus today. Here’s why
• Is the CSL (ASX:CSL) share price good value?

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The Nuix Ltd (ASX: NXL) share price has started the week in a positive fashion.

At the time of writing, the investigative analytics company’s shares are up 2% to $1.61.

Why is the Nuix share price rising?

Investors have been buying the company’s shares this morning following the release of a board update.

According to the release, Nuix is launching a number of initiatives in response to recent market feedback.

This includes the establishment of an Independent Board Sub-Committee. Nuix believes doing so will ensure the appropriate oversight and review of recent matters raised by market participants.

The release explains that the Independent Board Sub-Committee will comprise of independent directors Hon. Jeff Bleich, Sir Iain Lobban and Sue Thomas. They will work with external advisers and Nuix’s internal legal and risk management functions.

In addition to this, the company revealed that it intends to expand its Board composition from the current five members with the appointment of additional independent non-executive directors.

Nuix has appointed an international search firm to assist in the selection process. Criteria for the appointees will consider an objective to increase diversity and include a preference for Australian-based candidates with experience in relevant areas. This includes areas such as international business, technology, finance and accounting, governance, and risk management.

Chairman commentary

Nuix’s Chair, Jeff Bleich, commented: “The recent Nuix investor day showcased a truly great company with unique and world-class technology and people. In my address I made clear that the Board was listening to the feedback from our shareholders and the market. These initiatives are important building blocks to continue to strengthen corporate governance and achieve our performance objectives.”

“Nuix remains focused on delivering for its customers, maintaining a robust and vibrant corporate culture and achieving its potential. The Company continues to attract and maintain world-class talent and add to its already deep executive bench strength, including the recent hires of a number of senior executives into important client-facing roles,” he added.

More reading

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A prominent stock commentator has warned of complacency setting in among retail investors after the spectacular post-COVID share market recovery.

Fidelity International investment director Tom Stevenson especially singled out unconditional optimism as a recipe for disaster.

“Are you becoming more optimistic as the market rises?” he asked in a column on Sharecafe.

“Watch this tendency because the best returns have been achieved by investors who adopt the opposite approach.”

He referred to a former colleague who taught junior fund managers “to become more bullish as the market fell”. 

“Easy to say and very difficult to do,” said Stevenson.

“The growing appetite for risk-taking in obscure and volatile assets like cryptocurrencies suggests people are chasing growth. That’s worrying.”

Invest when you don’t want to

Buying shares when everyone else is selling is the best way to nab returns.

But Stevenson acknowledges this is difficult, even for professionals.

“Are you an emotional investor? This is a silly question. Of course you are – you are a human being.”

The way to remove the emotion out of buying is to do it “regularly and systematically”, according to Stevenson.

“It makes you invest when you don’t want to – invariably the best time to do so.”

Have some cash in hand for volatile times

Aside from quarantining enough cash for day-to-day living and emergencies, Stevenson encouraged punters to set aside some capital during the good times. 

This is so you can buy up when bad times hit.

“If you were fully invested in March 2020 you would have enjoyed the subsequent recovery – but how much better if you could have added to your investments at bargain basement prices?” Stevenson said.

“Having some cash to hand (separate from what you’ve put aside to cover expenses) is essential if you are to benefit from Mr Market’s mood swings.”

How much can you stomach a downturn?

There are many first-time stock investors who are currently experiencing a downturn in their portfolio for the first time.

Stevenson reminded punters accepting the unavoidable share market downs goes hand-in-hand with enjoying the great highs.

But everyone has a different tolerance for volatility.

“You also need to be realistic about what you can, and cannot, live with,” he said.

“How well do you know yourself? Twelve years into a bull market, it is tempting to think that we have a greater tolerance for risk than we actually do. You will find out what your real risk appetite is when your portfolio is worth 30% less than it is today.”

More reading

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• These are the 10 most shorted shares on the ASX
• Two men face 10 years’ jail for insider trading of ASX shares

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The Euro Manganese Inc CDI (ASX: EMN) share price is on watch this morning after news of the company’s Chvaletice Project was released. Shares in Euro Manganese closed the last session trading for 47 cents.

The manganese producer has updated the market on its Chvaletice Project, which aims to produce high-quality and environmentally friendly ultra-high-purity manganese for European electric vehicle and lithium-ion battery industries.

The project is located 90 kilometres east of Prague and is expected to be completed in in late 2024 or early 2025.

Euro Manganese’s wholly owned subsidiary, Mangan Chvaletice s.r.o, owns 100% of the Chvaletice Project.

Let’s take a look at the news that could impact the Euro Manganese share price today.

Chvaletice Project update

According to Euro Manganese, the Chvaletice Project’s definitive feasibility study will be completed by the first quarter of 2022.

The study will mean the company will be able to make a final investment decision and secure financing for the project.

However, Euro Manganese warned the project is facing risks from COVID-19 that could impact the company’s ability to meet its upcoming targets.

The news follows the close of the second tranche of an oversubscribed $30 million placement, completed by Euro Manganese earlier this month.

Euro Manganese also announced it’s still in discussions with customers for the project’s high purity manganese products.

It states interest in the project’s products is increasing as it’s the only large manganese resource in the European Union.

Euro Manganese is still working to complete the Chvaletice Project’s last Environmental and Social Impact Assessment. The assessment is also due to be finished in the first quarter of 2022.

The company has engaged with the Czech community and has support from the Czech Government. As a result, it believes none of the project’s stakeholders house any critical concerns.

According to Euro Manganese, previous activities at the Chvaletice Project have contaminated the local ground water. The company says it plans to remove the pollutants and restore the site to “a more natural state”. It hopes the Chvaletice Project will use only recycled, contaminated, and wastewater in its production process. Tests to find if the contaminated ground water could be a water source for the plant are planned.

Finally, the company has bought 97% of the equipment needed to build the Chvaletice Project’s demonstration plant. It states the detailed designs for the plant are progressing well.

Commentary from management

Euro Manganese’s CEO Marco Romero commented on the company’s vision for the Chvaletice Project, saying:

For many prospective customers, the Chvaletice Manganese Project ticks all the boxes.

As a recycling project, we have the potential to be one of the world’s greenest sources of high purity manganese, which will help auto makers and battery manufacturers meet the EU’s increasingly stringent environmental standards. We expect to help the EU meet its decarbonisation goals, while cleaning up a longstanding source of water pollution and creating long-term local employment. There’s no other [high purity manganese] production opportunity like this in the world.

Euro Manganese share price snapshot

In general, the Euro Manganese share price has been performing well on the ASX. Though, after a good start to 2021, it’s been struggling in the past few months.  

Currently, the Euro Manganese share price is up 8.14% year to date. But the price has fallen 47.16% since its 2021 high of 88 cents in mid-January.

Shares in Euro Manganese have also gained 481.25% since this time last year.

The company has a market capitalisation of around $117 million, with approximately 371 million shares outstanding.

More reading

• Why the Euro Manganese (ASX:EMN) share price is up today

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If you’re interested in blue chip shares, then you might want to take a look at the CSL Limited (ASX: CSL) share price.

CSL is one of the world’s leading biotherapeutics companies with a portfolio of leading therapies and vaccines. This includes flu vaccines and countless plasma-based products.

What’s been happening?

CSL has been impacted both positively and negatively by the pandemic. While demand for flu vaccines have been increasing materially, its ability to collect plasma has been hurt by social distancing and other COVID-19 related headwinds.

The latter is bad news for CSL as plasma is a core ingredient in many of its most lucrative products. The shortage of plasma has driven up prices and is likely to impact its margins in FY 2022.

The good news is that plasma collections have been improving greatly and are expected to reach pre-COVID levels later this year. This is likely to mean that any margin pressures will be very short-lived.

Is the CSL share price in the buy zone?

According to a note out of Macquarie from last week, its analysts believe the CSL share price is in the buy zone. Macquarie has put an outperform rating and $312.00 price target on the company’s shares.

It isn’t the only broker that is positive on the company. Analysts at Citi have a buy rating and $310.00 price target on CSL’s shares at present.

The latter commented: “Over the last few weeks, most of CSL’s listed competitors have reported results. When we look at the data overall, it points to an improvement in the rate of plasma collection in April, which has been the main impediment to growth throughout the pandemic. It also points to continued strong demand for the end-product, in particular IG. Overall this gives us confidence in our Buy call on CSL, although we are yet to see the earnings trough for the company which will occur in FY22 given the long lead times from plasma collection to sale.”

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The Synlait Milk Ltd (ASX: SM1) share price is on watch this morning after the company downgraded its FY21 guidance.

Synlait shares finished Friday’s session trading 7.5% higher at $2.99 per share.

The milk powder and milk solids product manufacturer’s share price is down more than 50% over the past 12 months. Let’s take a look at Synlait’s new guidance.

Synlait’s expectations turn sour

Synlait shares will be in the spotlight after the company’s board downgraded its guidance figures this morning. This came after the company undertook an internal review of the “already disclosed risks” that are currently hampering its business performance.

Synlait now expects to make a net profit after tax (NPAT) loss of between $20 million and $30 million in FY21.

One of the reasons for the downgrade is the company’s expectation of ongoing shipping delays, which will result in the sale of some ingredient products occurring after the FY21 balance date.

Synlait is also achieving lower prices for ingredient products than usual, due to “prevailing market prices”, which it blames on a combination of sales phasing and volume pressure. Furthermore, the company says it’s adopting a “more conservative” approach to year-end inventory volumes and valuation, leading to what it believes is a safer guidance figure.

The Synlait share price crashed in late March after the company cancelled its original FY21 guidance following a significant drop in demand from A2 Milk Company Ltd (ASX: A2M). At that time, the company had forecast FY21 NPAT to be “broadly breakeven”.

But faltering guidances aren’t the Synlait board’s only problem. It’s also been hit in the past two months by the losses of its CFO and CEO in quick succession.

Management comments

Synlait CEO John Penno kept his update comments short but not so sweet, saying:

I am disappointed to share this news with our investor base. As a team we are focused on closing out this year as well as we can, then resetting, and delivering a much improved financial performance in FY22.

Synlait share price snapshot

The Synlait share price has performed poorly since the outbreak of the coronavirus pandemic slammed the Chinese milk and baby formula market shut. Synlait shares are now down near the company’s five-year lows, after peaking at over $12 in late 2018. The company’s shares have lost 39% in 2021 alone.

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At the start of each week I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Flight Centre Travel Group Ltd (ASX: FLT) remains the most shorted ASX share despite its short interest easing to 10.2%. This travel agent’s shares have come under pressure recently after guiding to a larger than expected second half loss and concerns over travel agent commission reductions.
• Kogan.com Ltd (ASX: KGN) isn’t far behind after its short interest rose to 10.1%. Last week this ecommerce company revealed that inventory issues continue to weigh on its performance. As a result, it expects to fall well short of analyst expectations in FY 2021.
• Resolute Mining Limited (ASX: RSG) has seen its short interest rise week on week to 10%. This gold miner’s shares have been sold off this year due to regulatory issues at its Bibiani operation in Ghana and underwhelming production and guidance.
• Temple & Webster Group Ltd (ASX: TPW) has seen its short interest rise to 9.9%. Short sellers have been increasing their positions in this online furniture and homewares retailer due to a recent and disappointing trading update.
• Tassal Group Limited (ASX: TGR) has short interest of 9.6%, which is flat week on week once again. Weakness in salmon prices and trade war concerns appear to be behind this high level of short interest.
• Webjet Limited (ASX: WEB) has seen its short interest rise week on week to 9.4%. A stuttering travel market recovery, valuation concerns, and travel agent commission reduction fears could be weighing on investor sentiment.
• Electro Optic Systems Hldg Ltd (ASX: EOS) has entered the top ten with short interest of 8.3%. Short sellers may be concerned that the communications, defence, and space company’s performance will be impacted by supply chain issues.
• Megaport Ltd (ASX: MP1) has short interest of 8.2%, which is up again week on week. Short sellers may believe the Network as a Service provider’s shares are overvalued, especially with bond yields rising.
• Inghams Group Ltd (ASX: ING) has 8% of its shares held short, which is up slightly week on week. It appears as though investors are concerned about its major contract renewal negotiation with Woolworths Group Ltd (ASX: WOW). The sudden exit of its CEO may also be weighing on sentiment.
• JB Hi-Fi Limited (ASX: JBH) has entered the top ten with short interest of 7.4%. Short sellers may feel the retail giant’s shares are overvalued considering a sharp profit decline is being forecast in FY 2022.

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Two men are each facing 10 years in prison and a possible $810,000 fine for alleged insider trading of ASX shares.

Former Beacon Minerals Ltd (ASX: BCN) project manager Alexander McCulloch and external services provider Darryl Brian Mapleson both faced Perth Magistrates Court on Friday.

McCulloch faced 2 charges of insider trading, while Mapleson was charged with 3 counts.

According to the Australian Securities and Investments Commission (ASIC), both the accused allegedly knew of confidential results from Beacon’s stage one drilling program at the Jaurdi Gold Project.

McCulloch is accused of encouraging two associates to buy up shares before the result was announced to the ASX.

Beacon had commissioned Mapleson to be its Competent Person to handle announcements to the ASX. A competent person is a person that mitigates risk for a company.

He allegedly bought up 12,792,850 shares between 19 and 24 January 2017.

The drilling result was then revealed on the ASX on 31 January, which immediately pushed the stock price up 33%.

If found guilty, the maximum penalty for their insider trading charges is 10 years imprisonment or an $810,000 penalty — or both.

Mapleson’s case has been adjourned to 4 June, while McCulloch will return to court on 2 July.

Beacon shares were up 1.37% on Friday, changing hands for 3.7 cents.

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