Zip was forced to issue an explanation after its share price soared to a new all-time high for apparently no reason

  • Zip has been forced to admit it doesn’t know why its share price soared on Tuesday with no new developments announced.
  • “No, the Company is not aware of any information concerning it that has not been announced to the market which, if known by some in the market, could explain the recent trading in its securities,” company secretary David Franks wrote in a statement.
  • Regardless, its share price soared to an all-time high with a market cap now exceeding $7.5 billion.
  • Visit Business Insider Australia’s homepage for more stories.

One of Australia’s biggest buy now, pay later companies is at a loss for words as its share price enters uncharted territory.

On Tuesday, Zip soared to an inter-day high of $14.43 before closing the session at $13.92, a gain of around 10%.

Despite ending the day as the ASX’s biggest mover however, there appears to have been nothing behind the huge buying spree.

There were no major announcements around a new acquisition or merger, no upgrade to profitability, and absolutely no hint as to what may have set the market into a tizz.

In fact, the only news to come out of Zip on Tuesday was an innocuous link to register for a Thursday conference cal to discuss the company’s half year results. Hardly market-moving stuff.

It is no doubt however why the ASX quickly issued Zip a ‘please explain’ notice as to what could account for the company’s market cap jumping $1 billion in the space of a few hours.

“No, the Company is not aware of any information concerning it that has not been announced to the market which, if known by some in the market, could explain the recent trading in its securities,” company secretary David Franks wrote in a statement.

In other words: your guess is as good as ours.

But Franks goes on to attribute it to what has become almost run-of-the-mill market hysteria surrounding growth stocks, and Zip’s sector specifically.

“The Company notes that there has been significant interest in the Buy Now Pay Later (“BNPL”) market generally,” he wrote.

Such interest propelled Zip to a market cap to around $7.5 billion, or more than companies like JB Hi-Fi, the bloodied Crown Resorts, and Nine Entertainment, the owner of Business Insider Australia.

In fact, it’s been sufficient to more than double the value of Zip shares in the space of a month, on the back of strong US growth and an oversubscribed funding round.

Frank’s reasoning for all of this is sound enough in a world where rival Afterpay’s market cap has swelled almost 20 times since April lows, with a $153 share price to boot.

Other BNPL players have performed far more modestly, with Zip co-founder Peter Gray left scratching his head a to why his company hasn’t quite popped off the same way, despite the business performing well.

“Our view would be on the revenue multiples we’re significantly undervalued when directly compared to Afterpay and obviously Affirm,” Gray told the AFR. “I think that one of the opportunities for us as we go to market this year is to bridge that valuation gap.”

On Tuesday, he may now have gotten both his prayers answered as well as something of an answer.

This market, it seems, does not run on value as much as it works on its own unexplainable whims.

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