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Buy-now-pay-later group Zip Co (ASX: ZIP) is planning to buy back up to $50 million of its shares in the wake of a tumbling share price in recent months – a situation that has accelerated over the past week.
While Zip’s shares were among those hit hard by yesterday’s share market rout which was driven by tariff tensions, falling to a 10-month low of $1.055, the stock made a solid recovery this morning to be trading at $1.325, up 11 per cent, at 10.29am (AEST).
However, Zip shares are well off their high of $3.56 achieved in December last year.
Compounding the US tariff turmoil over the last three sessions of trading on the ASX, the Zip stock was also hit last week by an adverse finding from the Federal Court in a long-running trademark dispute with mortgage provider Firstmac over the use of the “Zip” trademark.
Zip plans to begin the $50 million share buyback on about 23 April 2025 for a period of up to 12 months.
The company says the buyback is consistent with its capital management framework and reflects “the strength of the Zip balance sheet, the continued delivery of operating cash flows and Zip’s outlook for future profitable growth”.
Zip notes the buyback will not exceed 10 per cent of issued capital over the 12-month period, which at this stage appears unlikely as Zip has a market valuation of $1.55 billion.
“We continue to execute on our strategic priorities with the group generating strong operating cashflows and maintaining balance sheet strength,” says Zip's CEO Cynthia Scott.
“The buyback program we have announced today is consistent with our capital management framework and focuses on maximising shareholder returns.
“Zip will maintain a strong balance sheet following completion of the buyback with ongoing flexibility to pursue future growth opportunities.”
Zip’s shares have been trending lower since the company announced a 68 per cent slide in bottom-line profit to $23 million in the first half of FY25.
News of its Federal Court loss against Firstmac last Tuesday was the start of the latest slump, which was exacerbated by the escalation of the US tariff war last week.
After announcing in June 2023 that it had won the trademark case against Firstmac, a full court ruled against the company earlier this month in a decision that would prevent Zip from using the trademark for its Australian services.
While Zip revealed last week that no orders have yet been made, it was seeking special leave to appeal the decision following the making of final orders by the court.
The latest development has prolonged Zip’s battle with Firstmac which has been under way since 2019.
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