Zip Co Limited (ASX: ZIP) is in freefall. The stock has lost 46.11% year-to-date (YTD), with a sharp 16.27% drop in the past week alone. Today, shares slid another 3.91% to $1.595, bringing its market capitalisation down to $2.1 billion.
The Trademark Battle That Shook Zip
On March 19, the Federal Court ruled in favour of Firstmac Limited, siding with the mortgage provider in a trademark infringement case against Zip.
The legal fight began in 2019 when Firstmac sued Zip for using the ‘Zip’ name, claiming trademark ownership. Last year, Zip had successfully defended itself, leading to the cancellation of Firstmac’s trademark. However, this latest ruling reversed that victory.
Zip is not backing down. At 9 AM today, the company announced its plan to appeal the decision.
“Zip intends to lodge an application for special leave to appeal the Federal Court decision,” the company stated.
While the legal battle continues, investors remain wary, fearing potential financial and reputational damage.
A Month of Pain: 35% Drop in 30 Days
Zip’s stock plunged 35.16% in the past month, driven by growing concerns over the lawsuit and broader market conditions.
Several factors have contributed to the sell-off:
- Legal Uncertainty: The ongoing litigation has shaken investor confidence.
- Market Volatility: The buy-now-pay-later (BNPL) sector faces increased scrutiny and competition.
- Macroeconomic Pressures: High interest rates and inflation continue to challenge consumer spending.
Zip’s Business Remains Unaffected – But Investors Are Uncertain
Despite the legal setback, Zip insists its operations remain unaffected. The company clarified that:
- There is no disruption to its Australian business.
- The lawsuit does not impact Zip’s US or New Zealand operations.
However, the market is not convinced. Investors are questioning whether legal costs, branding issues, or potential rebranding could impact the company’s bottom line.
What’s Next for Zip Co?
Zip now faces a critical test. It must:
- Secure a successful appeal to overturn the Federal Court’s decision.
- Reassure investors that the legal battle will not drain its financial resources.
- Prove that its BNPL model remains strong despite growing competition and regulatory scrutiny.
Final Thoughts: Can Zip Co Recover?
Zip has been a high-risk, high-reward stock, but 46% YTD losses signal deep troubles. While the company remains operationally sound, uncertainty is driving investors away.
Unless Zip secures a clear legal victory or strong financial performance, its downward trend may continue. Investors will be closely watching the appeal process and future earnings reports for signs of a turnaround.
