The past three months have seen Z1Ps share price been obliterated, down a breathtaking 48.72%. Today it closed down 5.88%, costing shareholders a massive $2.2 Billion in a single day. Is a Short Squeeze next?
Why is the Share Price Crashing?
The share price has fallen substantially since co-founders Larry Diamond and Peter Gray offloaded a total of 2 million shares for $9.18 apiece. Insiders selling big on the company creates fear from retail investors as they feel a drop in share price is imminent. In turn this created a self-fulfilling prophecy which has destroyed Z1Ps share price.
ZIP’s Cult Following
After the huge success of Z1P and the entire BNPL sector, the company has developed a massive cult following on reddit and hotcopper. Z1P has been highly advertised all over ASX_Bets, with ‘loss porn‘ and ‘pump and dump’ posts. ASX_Bets is the Australian version of popular subreddit ‘wallstreetbets‘ which gained media attention this year after catapulting Gamestop stock to the moon creating an historic Short Squeeze.
Is a Short Squeeze Imminent?
In our article about the most shorted stocks on the ASX we discussed the two necessities for a short squeeze event:
- High percentage of shorted float
- Media Coverage
Z1P is one of the most shorted stocks on the ASX today. With a short stake of 577,193 or 10% of its public float. More importantly it does have media coverage due to its popularity and cult following on ASX_bets.
“Media attention is the main reason for GameStops success, with the widespread coverage there were many more people jumping aboard in FOMO. Having such a high short position was only half of the reason for the price jump. With so many people jumping aboard any stock could be pumped and dumped.”
Gains on the Horizon
Z1P’s sell off has occurred despite a series of excellent announcements starting with their quarterly results where ZIP delivered record revenue and transactions. It recorded an 80% increase in revenue, pulling in $114.4 million. As well as a 195% increase in transactions, processing an impressive 12.4 million.
ZIP also has a massive vested interest from Bank of America, from an announcement made on 20 April Bank of America has been purchasing shares in ZIP and now holds 6.15% of the company.
In April ZIP announced a lucrative agreement with Adobe to become an Accelerate partner in the Adobe Exchange Partner Program. The partnership will see Zip become the BNPL provider for Adobe’s e-commerce software, Magento. This deal will secure excellent revenues for Z1P.
We are unsure if a short squeeze or media pump is likely but it would be interesting to say the least. Nonetheless we have seen a massive sell down of an excellent company which still seems to have solid announcements and results.
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