The Zip Co Ltd (ASX: Z1P) share price hasn't been having a great time of it lately. Zip shares are today trading at $1.65 at the time of writing, down a nasty 4.07%. That's after the buy now, pay later (BNPL) share hit yet another 52-week low this morning of $1.62.
2022 has certainly been a year to forget for Zip shares. Even though it's only March, Zip is now down a painful 61.5% year to date as it stands today. Over the past 12 months, the company has lost more than 82% of its value.
But it's not as if Zip hasn't had anything to give investors recently. Last month, the company made waves when it announced that it would be merging with its fellow BNPL provider Sezzle Inc (ASX: SZL). If all goes to plan, Sezzle shareholders will receive 0.98 shares of Zip for every Sezzle share owned when the deal is done.
But investors seem to have taken a strong dislike to these merger plans. That's going off of the fact that the Zip share price has descended more than 20% since the announcement was made public.
It's not unclear why investors might not be too keen on this deal. But one analyst has an idea.
According to reporting in the Australian Financial Review (AFR), an analyst at broker Citi has taken umbrage with some of the assumptions that Zip is making with its merger deal.
Image source: Getty Images
Zip share price: Analysts struggle to find value in Sezzle merger
The report quotes a research note from analyst Siraj Ahmed, which claims that the 25% customer overlap between the two companies is higher than what Citi is estimating. Citi only reckons the two businesses have a 15% overlap. That would directly affect the revenue synergies that the two companies are factoring in with their deal. Here's some of what Ahmed said on these concerns and more:
While we would assign a (relatively) high probability on the cost synergies being delivered, we see the Sezzle acquisition as an expensive customer acquisition strategy and remain concerned on whether revenue yield of 6%-7% is sustainable over the medium-term.
But Ahmed and Citi aren't the only ones expressing concerns over some of these metrics. The report also claims that analysts at Macquarie Group Ltd (ASX: MQG) have similar concerns. Macquarie's analysts concluded that "this appears to be a merger out of necessity rather than one to create long-term shareholder value".
Hardly a vote of confidence from these brokers. Saying that, not all analysts have been as negative. My Fool colleague James had a look at some analyst views last week that were markedly more positive on the Zip-Sezzle marriage. But only time will tell what might play out in this space. For now, it seems investors have yet to be convinced it's a good idea.
At the current Zip share price, this ASX 200 BNPL share has a market capitalisation of $1.11 billion.
