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The Yancoal Australia Ltd (ASX: YAL) share price is on the move today after the company released its financial results for the full year ended 31 December 2021 after the closing bell yesterday.

At the time of writing, Yancoal shares are surging 14.94% higher at $4.00 apiece.

Yancoal share price lunges forward on record earnings growth

The Yancoal share price is rocketing after the company announced its earnings results. Key takeouts include:

• Record revenue from continuing operations of $5.40 billion, up 56% from $3.47 billion same time last year
• Operating earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $2.53 billion, up from $748 million in FY20 – due mainly to the increased revenue
• Operating profit before tax of $1.41 billion, up from a $218 million loss in FY20
• Early debt repayment of US$500 million in October, plus a significant reduction in the gearing to 24%
• Net profit after tax (NPAT) of $791 million, well above the $1.04 billion loss in FY20
• Cash of $1.5 billion at the end of the year
• Reinstated dividend due to strong cash earnings and lower gearing.

What happened this period for Yancoal?

Yancoal posted a solid set of financial and operating results for the year, underscored by a higher realised coal price and increased ratio of metallurgical coal sales.

As such, the company secured a record revenue of more than $5.4 billion for the period, staging an impressive performance for earnings across the board.

This led to a sizeable gain in EBITDA from almost $750 million to $2.5 billion. That’s a staggering gain of approximately $1.75 billion in operating income for the year.

Additionally, Yancoal enjoyed a substantial reversal in the loss of $1 billion it sustained in FY20 to recognise NPAT of $791 million.

Not only that, but capital expenditure came in below guidance at $269 million “after some FY21 planned spending was held over into FY22”.

However, as sales jumped, the cost of these revenues also jumped for the company in 2021. For instance, Yancoal’s cash operating costs were $67 per production tonne versus $59 a tonne in 2020.

“Higher diesel prices, demurrage costs, and reduced output due to issues at Moolarben, wet weather, and COVID-19 were factors in the cost increase,” the company said.

Nevertheless, the mammoth jump in earnings allowed the board to resume dividend payments. It allocated $930 million in surplus cash to a 50 cents per share final dividend and a 20.4 cents per share special dividend (both unfranked).

Management commentary

Speaking on the announcement pushing up the Yancoal share price today, CEO David Moult said:

The health and wellbeing of all our employees are of vital importance to Yancoal, and management and operational staff worked closely together during 2021 on the continued implementation of an effective COVID-19 pandemic response plan. The effort of all involved kept the production impacts of COVID-19 to a minimum, but there were some unavoidable production losses due to logistics constraints and staff absences because of mandated isolation requirements. We remain vigilant to the continued risks posed by the pandemic.

In relation to broader health and safety issues, Yancoal’s 12-month Total Recordable Injury Frequency Rate remained below the comparable industry average throughout 2021.

What’s next for Yancoal?

The company has set a number of guidance targets for 2022. Specifically, it is targeting saleable coal production of 35 to 38 million tonnes (attributable) and cash operating costs (excluding government royalties) of $71 to $76 per tonne. It is expecting capital expenditure of $600 to 650 million for the year.

“The bottom end of the production guidance and top end of the cost guidance is where existing challenges persist,” the company noted.

“Capital expenditure increases in 2022, after two years of modest expenditure, as the Group replaces some mining fleet and to keep our large-scale, low-cost mines performing efficiently, together with the completion of the Moolarben coal wash plant upgrade.”

Yancoal share price snapshot

In the last 12 months, the Yancoal share price has surged by 67%. It is also 54% higher this year to date.

During the past month, shares have spiked by 42%. As a result, Yancoal is clearly leading the broad index’s return in 2022.

The post Yancoal (ASX:YAL) share price surges 15% as dividends merrily return appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Strike Energy Ltd (ASX: STX) share price is rangebound in early Tuesday trading and is now flat at 26.5 cents.

The investing piranhas aren’t biting today despite a company announcement regarding Strike’s South Erregulla target.

As seen in the chart below, Strike Energy has substantially trailed its global peers in the Nifty Commodities Index – a proxy for the performance of the commodities segment as a whole.

Let’s take a closer look at the company’s market update today.

What did Strike Energy announce?

Strike advised it has successfully cored an approximate 45-metre interval from a previously drilled 4,859 metres at the Western Australia site. It has also retrieved the core to the surface.

Today’s announcement follows an update made in a previous release on February 25.

At that time, Strike announced it had successfully completed drilling through two coal formations at South Erregulla – and of its aim to complete another 45 metres target depth.

The company’s South Erregulla resource is located in the “100% Strike-owned EP503 which adjoins EP469 where Strike as operator has made a large, high quality conventional gas discovery at West Erregulla”.

Apparently, Strike is aiming to secure the gas requirements for its Project Haber, “Strike’s proposed Mid-West based 1.4mtpa urea fertiliser manufacturing facility”.

Today’s announcement confirms Strike could be on the way to meeting its objectives if assay results come back with positive data on resource estimates.

Company comment

According to Strike:

Steady coring conditions with gas shows were observed during the coring operations. The core has now been sent to the laboratory for several rounds of testing.

As a result, Strike has started preparations to reach the final depth in the Holmwood Shale by running in hole with the drilling assembly and logging while drilling, according to the announcement.

Looking forward, Strike says it will drill to final depth in the Holmwood Shale, condition the hole, then “[pull] out the drill string in order to commence wireline logging and evaluation”.

Investors haven’t bought in today. However, most of the information was released back on February 25 – when shares climbed marginally. It seems the market may have already priced in the ‘good news’ beforehand.

Strike Energy share price snapshot

In the last 12 months, the Strike Energy share price lost almost 16%. However, it has surged 29% year to date.

During the past month of trading, the company’s shares have charged another 23% higher. This puts Strike well ahead of the broad index’s performance so far this year.

The post Here’s why the Strike Energy (ASX:STX) share price has struck out this morning appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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At lunch on Tuesday, the S&P/ASX 200 Index (ASX: XJO) is on form again and charging higher. The benchmark index is currently up 1.3% to 7,142 points.

Here’s what is happening on the ASX 200 today:

Zip shares tumble after raising ~$150m

The Zip Co Ltd (ASX: Z1P) share price sank to a new 52-week low on Tuesday morning after returning from a trading halt. This followed the completion of a ~$150 million institutional placement which was undertaken at a 14% discount of $1.90 per new share. Separate news that the company has signed an agreement to acquire Sezzle Inc (ASX: SZL) for $491 million wasn’t enough to support its shares.

Crown hit by AUSTRAC proceedings

The Crown Resorts Ltd (ASX: CWN) share price is falling today after the casino and resort operator revealed that AUSTRAC has commenced civil penalty proceedings against its Crown Melbourne and Crown Perth businesses. The regulator is alleging contraventions of obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

IGO shares jump on Glencore update

The IGO Ltd (ASX: IGO) share price is storming higher today. This follows the release of an update on its talks with Glencore regarding the potential acquisition of the CSA Copper Mine. According to the release, talks have now concluded and no agreement has been reached. It appears as though the market was not keen on the deal.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Tuesday has been the Yancoal Australia Ltd (ASX: YAL) share price with a 15% gain. This follows the release of the coal miner’s full year results after the market close on Monday. The worst performer has been the Sandfire Resources Ltd (ASX: SFR) share price with an 11% decline. This morning Ord Minnett reaffirmed its sell rating with a reduced price target of $5.60.

The post ASX 200 (ASX:XJO) midday update: Zip shares tumble, AUSTRAC takes aim at Crown appeared first on The Motley Fool Australia.

More reading

• Why is the IGO (ASX:IGO) share price rocketing 8% today?
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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 ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The S&P/ASX 200 Index (ASX: XJO) is enjoying a very pleasant day of gains so far this Tuesday. At the time of writing, the ASX 200 is up a healthy 1.24% at 7,137 points. But the Endeavour Group Ltd (ASX: EDV) share price doesn’t seem to have gotten an invite to the party. That’s despite its primary business of running pubs and bottle shop chains like BWS and Dan Murphy’s.

Even though the ASX 200 is enjoying some sunshine, Endeavour shares are presently down by a seemingly nasty 1.82% at $7.03 a share. So what gives?

Well, there’s been no major news or announcements out of Endeavour today. But there is still a fairly straightforward explanation for this share price fall Endeavour which investors are enduring today. Today is the day that Endeavour shares trade ex-dividend for the company’s upcoming dividend payment. 

Back on 21 February, Endeavour reported its half-year earnings for the first half of the 2022 financial year. As we reported at the time, Endeavour delivered a fairly flat set of revenue numbers. However, the company was able to grow net profit after tax (NPAT) by 15.6% to $311 million. These numbers saw the Endeavour share price jump at the time. 

Endeavour share price pops its interim dividend cork

But Endeavour’s earnings report also naturally included an interim dividend announcement – it’s first since it was demerged out of Woolworths Group Ltd (ASX: WOW) last year. Endeavour will be forking out a fully franked interim dividend of 12.5 cents per share. That is a large increase over last year’s final (and paradoxically, first ever) dividend of 7 cents per share.

The company’s shares trade ex-dividend for this payment today, which means that any new investors from today will not receive said payment. That’s probably why the Endeavour share price is falling today. But investors will have to wait until 28 March to receive the cash and franking credits. 

Now that Endeavour has paid out two dividends in the past 12 months, we can now give its shares a full and accurate dividend yield. At the current share price of $7.03, and taking into account an annual payment of 19.5 cents per share, Endeavour has a dividend yield of 2.77%. 

Since its first day of trading last June, the Endeavour share price has given investors a return of approximately 15.25%. At the current Endeavour share price, the company has a market capitalisation of $12.57 billion. 

The post Party pooper? Why the Endeavour (ASX:EDV) share price is slumping today appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The IGO Ltd (ASX: IGO) share price is surging today despite talks of a potentially transformational copper deal falling through.

Discussions regarding IGO’s acquisition of the CSA Copper Mine – owned by Glencore – have ended without an agreement.

However, the market seems to be far from disappointed. At the time of writing, the IGO share price is $11.81, 8.05% higher than its previous close.

Let’s take a closer look at what’s driving the exploration and mining company’s stock higher on Tuesday.

IGO share price launches on failed acquisition talks

The IGO share price has burst into the green on Tuesday despite the end of talks that could have seen the company acquiring one of the richest copper mines in the world.

IGO confirmed it was conducting due diligence on the CSA Mine last week. As The Motley Fool Australia reported at the time, IGO was rumoured to be considering undergoing a capital raise to afford the acquisition ­– expected to be worth more than $1 billion.

In a statement released to the ASX today, the company said it, “regularly evaluates opportunities to grow its business via disciplined mergers and acquisitions.”

“The company will only complete transactions which it believes will deliver strong and accretive returns and are in the best interest of shareholders at the time,” IGO continued.

Today’s news has the potential to disappoint some market watchers. Luckily, there’s still plenty of hope for an IGO acquisition in the near future.

Fortescue Metals Group Limited‘s (ASX: FMG) Andrew ‘Twiggy’ Forrest gave IGO’s bid for Western Areas Ltd (ASX: WSA) the ‘thumbs up’ last month.

Forrest’s Wyloo Consolidated Investments owns a 9.8% stake in Western Areas.

IGO’s approximately $1 billion all-cash bid for the nickel producer was announced in mid-December.

The IGO share price has soared by around 70% over the past year. However, it is up just 3% this year to date and less than 1% over the past month.

The post Why is the IGO (ASX:IGO) share price rocketing 8% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Sayona Mining Ltd (ASX: SYA) share price is soaring on Tuesday following an announcement from the lithium development company.

At the time of writing, investors have driven the company’s shares to 13.5 cents apiece, up 20%. After entering a trading halt on Thursday, Sayona shares are now rapidly being traded today. Already, more than 37 million shares have exchanged hands today.

So, what’s all the fuss about?

Sayona says double the potential

Grabbing the attention of the market on Tuesday, ASX-listed Sayona has revealed a doubling of its Québec lithium resource base.

According to the update, upgraded resource estimates now peg Sayona’s North American Lithium (NAL) and Authier projects at a combined measured, indicated, and inferred mineral resource of 119.1 million tonnes at 1.05% lithium oxide.

Effectively, the upgrade represents a doubling from the company’s previous estimates. Unsurprisingly, investors are attempting to snap up shares in Sayona as the share price roars ahead.

This information follows independent studies carried out by consultants BBA Inc and SGS Canada. Based on the JORC mineral estimates published, the breakdown of the lithium resource between projects is:

• NAL — 101.92 million tonnes at 1.06% lithium oxide
• Authier — 17.14 million tonnes at 1.01% lithium oxide

For reference, a 0.6% lithium oxide cut-off was used when establishing the total mineral resources. Additionally, the identification of underground constrained resources at NAL was a first for the project.

Commenting on the update, Sayona managing director Brett Lynch said:

This expansion is a major achievement for Sayona as we further enlarge our leading lithium resource base in North America. Since the start of 2020, we have now grown our Québec resource base nearly six times and with further increases expected soon from Moblan.

With lithium prices surging on the back of an increasing structural supply deficit, our upcoming definitive feasibility study for an integrated NAL‐Authier operation, expected in coming weeks, is set to show significantly enhanced profitability for the benefit of shareholders.

How has the Sayona share price been performing on the ASX?

Excitement in the Sayona share price began to peter out towards the tail end of last year. In fact, between September 2021 and the end of the year, ASX-listed Sayona tumbled approximately 32%.

Unfortunately for shareholders, this trend has continued into 2022, with shares down ~6% year-to-date. However, it’s not all doom and gloom for those who have held on over the long run.

Zooming out to a 12-month time frame, Sayona investors are sitting smitten with a 340% return. That trumps the S&P/ASX 200 Index (ASX: XJO) by a long way.

The post Sayona (ASX:SYA) share price lights up 18% as lithium resource doubles appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Rio Tinto Ltd (ASX: RIO) share price is trading even on Tuesday morning at $118.15, just under its previous close of $118.17.

The Rio share price has been on the receiving end of a now two-year commodities rally that’s helped ASX miners realise the highest levels of free cash flow in decades.

Rio, with its market-leading position and market capitalisation of $43.8 billion dollars, is front and centre stage amid the rally. The company has just posted some of its highest full-year earnings results since changing its name to Rio Tinto in 1997.

The mining giant recorded an 88% leap in free cash flow to US$17.66 billion. This enabled the board to declare a similar 87% jump in the total dividend to US$10.40. Yes, that’s ten dollars and forty cents — the biggest payout recorded on the ASX’s books.

What’s next for Rio Tinto?

Rio’s record-beating results came on the back of the record-beating commodities rally that’s been happening since 2020.

Commodities across the board saw a huge uplift and have remained buoyant, albeit with some minor setbacks along the way.

According to Tyndall Asset Management’s Brad Potter, Rio’s performance in 2021 hinged on this rally in metals last year.

“Rio benefited from very strong commodity prices right across the spectrum during 2021,” Potter said, speaking to an episode of Investment Insights on Livewire.

“It wasn’t just a story of iron ore, though, with their copper and aluminium divisions also reporting very strong results, cash flows and dividends were a record, and the balance sheet remains in a net cash position, so the company is in a very strong place.”

This kind of fundamental momentum should bode well for the company throughout 2022, Potter says, especially if iron ore and copper markets stage another rally to set new record highs.

Undoubtedly, this would also bode well for the Rio Tinto share price. The company is seen as a ‘price taker’ on these markets. That is, it must accept what bids are offered in the spot or forward markets for metals.

We can see this relationship on the chart below. It shows the Rio Tinto share price plotted against the IAS iron and steel index and iron ore futures up to the end of February 2022.

As such, if commodities such as iron ore continue to set new highs, this is sure to beef up revenue, operating profits, and free cash flow for Rio, according to Potter.

“The expectation going forward though is that in 2022 we should see another strong year of earnings, cash flow, and dividends as commodity prices are expected to remain high,” he said.

This is equally important seeing Rio’s cost base widened substantially last year. Its costs are now running ahead of its competitors.

“Operationally Rio was a little disappointing, with costs and volumes not performing to expectations,” Potter said.

“Rio is now the highest cost producer in the Pilbara, from a position of where they were once lower than BHP and Fortescue.”

Rio Tinto share price snapshot

After taking a beating in 2021 and faltering 8% over the last 12 months, the Rio Tinto share price is soaring 18% higher in 2022.

It’s gained 6% in the past month alone.

By comparison, the S&P/ASX 200 Index (ASX: XJO) has dropped 4% since the start of 2022.

The post The latest Rio Tinto (ASX:RIO) dividend is the biggest in Australian history. What’s next for the miner? appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Argosy Minerals Limited (ASX: AGY) share price is powering ahead today. This comes after the lithium miner provided an operational update at the Rincon lithium project.

The company holds a 77.5% interest in the Rincon project, located in Salta Province, Argentina. The mine is situated within the ‘lithium triangle’ – the world’s dominant lithium production source.

At the time of writing, Argosy shares are fetching 32.5 cents apiece, up 8.33%.

How is Argosy tracking along at Rincon?

The Argosy share price is surging after the company advised that 61% of construction works have been completed to bring the Rincon lithium project online. The development of the modular 2,000 tonnes per annum (tpa) of lithium carbonate production operation is currently on schedule and budget.

The company is aiming to achieve the first commercial production of lithium carbonate product from mid-2022.

Argosy noted that major works consisting of the design phase, site construction, and plant commission works have advanced. As such, Argosy provided a snapshot of the current progress:

• 99% of earthworks/land movements completed;
• 87% of site works completed (site camp/accommodation, laboratory and office, and other works);
• 100% of the brine system is now complete (pumping station and plant settling ponds);
• 57% of the process plant completed (plant equipment acquisition and plant warehouse); and
• 58% of utilities and associated services (vapour system, communication system and ancillary services).

Management noted current and recent construction works have concentrated on finalising a number of areas. This includes the accommodation camp facilities, building various industrial sheds, completing the brine system, building the on-site office and laboratory.

Furthermore, upcoming works will focus on plant and equipment delivery and installation, utilities and associated services supply and installation, and auxiliary systems installation. It is expected that significant progress will be made over the coming months.

Argosy hopes to increase the 2,000tpa of lithium carbonate to a 10,000tpa production target. It believes that with lithium prices rising along with tightening market supply and demand conditions, potential off-take arrangements will become more attractive.

Management commentary

Speaking about the development boosting the Argosy share price, managing director Jerko Zuvela said:

The company’s Puna operations team are continuing their significant progress on construction and development works at our Rincon Lithium Project, as we head toward commencing the 2,000tpa lithium carbonate production operations.

The lithium market remains very positive and lithium carbonate prices are at record levels, which is providing great interest in our project and especially our product, noting our Rincon Lithium Project will become the next commercial production operation. Argosy’s transformation into a cashflow generator is nearing, whilst also progressing toward the next stage 12,000tpa scale operations.

We look forward to a significant near-term growth phase from our operations this year and beyond.

About the Argosy share price

In the last 12 months, the Argosy share price has gained around 190%. However, it is flat this year to date.

On valuation grounds, Argosy has a market capitalisation of roughly $420.15 million, with 1.31 billion shares on issue.

The post Argosy (ASX:AGY) share price buzzes 8% higher on lithium project news appeared first on The Motley Fool Australia.

More reading

• Argosy (ASX:AGY) shares climb on ‘significant milestone’ at Rincon

Motley Fool contributor Aaron Teboneras owns Argosy Minerals Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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After a pretty dismal January, it might come as some relief to investors to HEAR that the S&P/ASX 200 Index (ASX: XJO) recorded a positive gain for the month of February. The ASX 200 managed to eke out a 1.1% rise over the month that was. But it’s not too often you’ll hear this these days – the AMP Ltd (ASX: AMP) share price did far, far better. 

Yes, AMP shares had a February to remember. The financial services company started the month at 88 cents a share, but ended it yesterday at 95 cents a share. That’s a rise of 7.95% for the month, and a multi-fold beat on the broader performance of the ASX 200 Index. 

So what was behind AMP’s successes last month? 

AMP share price notches up some wins

Well, there were a few developments for the company which may have fed into these gains. 

The first was AMP’s full-year earnings that the company delivered on 10 February. As we covered at the time, AMP reported underlying net profits after tax (NPAT) of $356 million. That was up 53% from the $233 million that was recorded the previous year. However, the company reported a statutory NPAT loss of $252 million, with no dividend announced for investors. Even so, the AMP share price reacted very positively at the time. 

But we also got some developments regarding AMP’s planned demerger of its Capital Private Markets business. The company announced that the demerger should be completed “in the first half of 2022”. We even heard what this new business will be called – Collimate Capital. 

A few days later, reports emerged that ‘Collimate’ had a potential suitor in the wings. That would be the Singapore-based real estate company CapitaLand.

So all of these developments seem to have boosted investor sentiment towards AMP shares, and likely contributed to the company’s impressive performance over February. 

But longer term, the picture is still leaving a lot to be desired. AMP shares are still trading very close to their 52-week low of 88 cents a share as it stands today. At the current AMP share price, of 96 cents a share, AMP remains down almost 35% over the past year. As well as down more than 81% over the past 5. 

The post Why did the AMP (ASX:AMP) share price leap 8% in February? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Zip Co Ltd (ASX: Z1P) share price has returned from its trading halt and is tumbling lower.

In morning trade, the buy now pay later (BNPL) provider’s shares were down as much as 11% to a new 52-week low of $1.96.

At the time of writing, the Zip share price has recovered a touch but remains down 7% to $2.05.

Why is the Zip share price falling today?

This morning Zip announced the successful completion of its fully underwritten $148.7 million institutional placement. These funds were raised at $1.90 per new share, which represents a 14% discount to the Zip share price prior to its halt.

This placement will result in the issue of approximately 78.3 million new Zip ordinary shares, representing approximately 13.3% of existing shares on issue.

Zip will now push ahead with its share purchase plan, which is aiming to raise a further $50 million from retail shareholders. These funds will be raised at the lower of the placement price or a 2% discount to the five-day volume weighted average price (VWAP) of Zip shares up to and including the closing date of the share purchase plan. This is currently scheduled for Friday, 1 April 2022.

Why is Zip raising funds?

The proceeds raised under the placement will help Zip strengthen its balance sheet and position the company for sustainable growth.

This is by providing more capital runway to execute on the potential synergies from its proposed $491 million all-scrip acquisition of Sezzle Inc (ASX: SZL), which was also announced on Monday.

Speaking of which, management believes the acquisition of Sezzle will significantly enhance Zip’s scale and product offering, with the capabilities to accelerate in the United States.

It also sees potential material cost synergies and opportunities for revenue and margin uplift. So much so, it is targeting potential EBTDA benefits of up to ~$130 million EBTDA in FY 2024.

Zip’s Co-Founder and Global CEO, Larry Diamond, commented: “We are delighted to be bringing Zip and Sezzle together under a transformational transaction that is expected to deliver immediate scale and enhanced growth, which will support our path to profitability. Combining with Sezzle positions us as a leading global BNPL provider and prioritises our ability to win in the important U.S. market.”

The post Why is the Zip (ASX:Z1P) share price sinking 11% today? appeared first on The Motley Fool Australia.

More reading

• 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
• Sezzle (ASX:SZL) share price on watch after accepting Zip takeover offer
• Zip (ASX:Z1P) share price halted after announcing results, capital raising, and Sezzle acquisition

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 ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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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