Zip Co sacks staff as buy now, pay later sector struggles

Zip Co’s market value continues to fall as interest rates rise, with shares last trading at 41c and its market value at $333m.

Zip Co is understood to have taken the axe to its ranks in the past fortnight, with sources suggesting that up to 20 per cent of its 1500-strong workforce has been shown the door.

The move by the buy now, pay later provider is set to be followed by other financial groups.

Job cuts have been expected across the board in the weeks leading up to the end of financial year on June 30, with a weakening economic environment and rising costs.

Zip Co said in a statement that it was “always adjusting our structure and cost base to ensure we deliver our priorities”.

It said that following a recent review, it had decided to streamline its operations and cost base.

The company is battling strong headwinds, as shown last month when it raised $25m to reduce the risk around its $330m convertible bond through investment bank Goldman Sachs, with lenders already wiping the value of their investment to 47.5c in the dollar.

In addition, the buy now, pay later sector is facing new regulation.

The raising reduced its liability from $330m to $137.8m for the convertible bonds, which are due to be repaid in 2025.

But the company’s market value continues to fall as interest rates rise, with shares last trading at 41c and its market value at $333m.

Zip made a $241m statutory loss for the six months to December and had cash losses of $33m in the half, leaving it with $78.5m of cash and liquidity at December.

The group, which operates in the US, Australia and New Zealand, has been retreating from international markets, as revealed by DataRoom.

Previously it was targeting 14 countries for international expansion.

In its last annual report, Zip Co said it had almost 1500 employees.

At its half-year results, Zip Co said it continued to focus on streamlining its organisational structure and driving efficiencies in its core markets.

Meanwhile, job cuts are also expected at Link after it announced that superannuation fund Hesta was not renewing its contract with the superannuation administration firm.

This represented about 4 per cent of Link’s estimated revenue for the 2023 financial year.

Link has reaffirmed its operating earnings guidance, but some believe the development is a major blow for the company.

Suitors including Barings Private Equity and FNZ are now unlikely to move on the target any time soon.

On Friday, its shares crashed by almost 14 per cent on the news, taking its market value to less than $1bn.