By James Eyers
Zip Co plans to list on the Nasdaq as American investors grow increasingly optimistic
about the prospects of the buy now, pay later sector.
The point-of-sale credit provider will maintain its primary listing on the ASX, where it
floated in 2015, the year before rival Afterpay. But a presence on the technology-heavy
Nasdaq exchange would support a “significant growth opportunity” in the United States
by broadening the investor base, Zip said on Friday after handing down a record full-year
profit.
Zip makes 80 per cent of its cash earnings and more than two-thirds of sales in the US. A popular stock for ASX retail investors, Zip said offshore institutions now hold 16 per cent of its shares, with that number to rise.
“We have seen an increase in offshore investor interest, and from the US in particular,” said Zip chief executive Cynthia Scott. “Some can buy Australian stocks, but there is a large cohort of US investors for whom a US listing is a requirement. And, most of our peer group is in the US – Affirm, Sezzle, Klarna and Block – so there is a more natural investor base there.”
Zip, which is used by one in 10 Australian adults, said cash earnings for the full year jumped to $170.3 million from $69 million a year earlier. Total volume across its payment platform of $13.1 billion was up 30 per cent, beating expectations as it lifted margin guidance for the current year.
Zip shares rose 19 per cent on Friday to close at $3.72. They are up around 10 per cent compared with a 26 per cent gain for the S&P/ASX 200 index.
“The potential Nasdaq listing makes sense to us, given the US represents Zip’s primary growth market,” said Shaun Weick, a portfolio manager at Wilson Asset Management, a Zip shareholder.
“Zip is trading at around a 30 per cent discount to offshore listed peers, despite generating higher growth. We think continued momentum could close this valuation gap over time, as new investors come onto the register.”
The stock was hammered over the first quarter of this year on concerns that Zip’s bad debts in the US would rise as consumers were squeezed by rising prices brought on by President Donald Trump’s tariffs. Many of Zip’s customers cannot get traditional credit from US banks.
Those concerns have since eased, and the company said on Friday that bad debts in the US were flat over the fourth quarter, at 1.7 per cent of transaction value, inside its target range.
Active customers in the US grew 11 per cent over the year, and Zip said newer clients are spending more on the platform, as buy now, pay later financing becomes better known. Buy now, pay later transactions comprise less than 2 per cent of US payments, and only 6 per cent of e-commerce – lower than 15 per cent in Australian e-commerce, according to Zip.
American investors are considering whether the buy now, pay later sector – where retailers mostly fund the short-term instalment credit facilities, rather than the customers – can grow off that low base.
The signs are promising. Zip’s transaction volumes in the US rose 41.6 per cent year-on-year to $US6 billion. It also guided to strong growth this financial year, with the value of transactions over its platform in the US expected to rise by 35 per cent.
In the US, Zip competes with Afterpay, owned by Block – dual-listed on the ASX and in New York – along with Nasdaq-listed Affirm, Sezzle, and Klarna, which was trying to float in New York but, for now, remains private.
Sezzle was previously listed on the ASX but delisted in favour of the Nasdaq in 2023, and has seen its shares rise 85 per cent in six months. Affirm, meanwhile, is capitalisation at $US24 billion ($37 billion), even though it has fewer direct users than Zip, which has a market cap of about $4 billion.
A Nasdaq listing could see Zip’s register skew further towards global investors. At the time of Block’s dual-listing – which provided liquidity for Afterpay shareholders to sell stock after the $39 billion scrip deal in late 2021 – 17 per cent of the merged company’s shares were listed on the ASX. By last August, that number had fallen to just 7.4 per cent, and continues to fall.
A new eight instalments product was launched in the second half of the financial year to allow US customers to buy bigger ticket items spread over more payments, and made up 18 per cent of total transaction value in the fourth quarter. The company will introduce a new “pay in two” service in the first half of 2026, as it targets spending on utility bills.
Zip only offers interest-free instalment products in the US. In Australia, it lets users revolve the debt for a fee, and offers a credit-card style product.
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