Zip was planning to buy its competitor Sezzle, but now it has walked away from the deal.
👉 Background: Zip Co is the Aussie-founded buy-now-pay-later company that’s been on a global expansion and acquisition spree. It has expanded into the US, Mexico, Europe and the UK, just to name a few.
👉 What happened: As recently as this month, Zip was planning to buy out one of its competitors, Sezzle. But now, Zip has announced a real tightening of the belt.
👉 What else: Shares flew up 3% on the news and up 27% within five days. Zip says it has realised it needs to right-size its global footprint and reduce its burn rate.
💡A burn rate is the rate at which a company's cash pool decreases before it generates positive cash flow. Often this cash has been funded by venture capital firms or investors in the share market.
💡Zip has raised $893.6 million in funding since its inception. The plan has been to burn through a lot of cash to pursue growth. But now, investors and Zip itself were starting to worry it might run out of money.
💡So now Zip is getting out of Singapore, shutting down Pocketbook and ditching its business BNPL services. It's also stepping away from the deal to acquire another loss-generating business in Sezzle.
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