Zip share price skyrockets 22% on Amazon agreement

A company like Zip, Afterpay and PayPal is only as strong as its network of users and merchants.

It’s unsurprising then that Zip’s (ASX: Z1P) share price soared as high as 22% during the morning session after the company announced it had finalised a strategic agreement with Amazon Australia.

As part of this agreement, Zip's payment options will be available for customers shopping on Amazon Australia. Zip was also keen to point out that as it stands, the young company will be 'Amazon's first Australian instalment payment option.'

While evidently a positive for the fast-growing payments company, investors should remember that Amazon Australia pales in size and scale to its American counterpart; with Amazon representatives themselves in April commenting, that their current Australian operations, ‘it’s a pretty small proportion of the [retail] market.’

Zip share price: CEO comments

In response to today’s announcement, Zip's Managing Director and CEO, Larry Diamond commented:

'We are thrilled to have secured this strategic agreement with Amazon Australia.'

Mr Diamond further noted that:

'This agreement puts Zip firmly on the main stage by allowing customers shopping on Amazon.com.au to use Zip to pay at their pace. This agreement delivers a fantastic experience for customers who are looking to own the way they pay.'

Maybe the most vital part of this strategic agreement however is the further flexibility it will give to Zip’s existing customers, as well as the potential appeal it will create for prospective customers to make use of Zip’s payment offerings when shopping on Amazon Australia. Specifically, as the company further pointed out, this deal will expand 'the network of acceptance for Zip's 1.5 million digital customers.'

As we wrote previously, ZIP is targeting a user-base of 2.5 million customers by the end of the 2020 fiscal year.

Side-points of the agreement

One interesting aspect of this strategic agreement also involves the fact that Zip 'will issue to an affiliate of Amazon warrants to acquire up to 14,615,000 ordinary shares ("Warrants").'

The exercise price of these warrants is $4.70.

The company commented that it expected its payments solutions to be live on the Amazon Australia site on November 7.

The Zip (ASX: Z1P) share price currently trades at $3.91 per share, levelling off somewhat after the incredibly bullish start to the session.

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