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Zip Co Ltd (ASX: ZIP) shares have officially rejoined the S&P/ASX 200 Index (INDEXASX: XJO) today. The buy now, pay later (BNPL) stock had previously lost its position among the top 200 largest listed companies by market cap after its share price plummeted by more than 95% during 2021 and 2022. However, the company has made a notable comeback.
Stunning Share Price Recovery
Over the past 12 months, Zip shares have surged by an impressive 278%. This remarkable recovery can be attributed to the company's strategic shift under new management. Moving away from a growth-at-all-costs approach, Zip has adopted a more sustainable and profitable business model, which has gained the attention of investors. As a result, Zip's market capitalisation has grown to AU$1.97 billion.
Inclusion in ASX 200 Following Altium's Acquisition
The announcement of Zip's return to the ASX 200 came on July 12, when S&P Dow Jones Indices revealed that Zip would replace Altium Limited (ASX:ALU) in the benchmark index. Altium was acquired by Renesas Electronics Corporation, creating an opening for Zip's reentry. This reclassification is expected to provide additional support for Zip in the long term.
Impact on Investment Funds
Zip's inclusion in the ASX 200 allows fund managers, who are restricted to investing in larger market cap companies, to add Zip to their portfolios. Additionally, index tracking funds that aim to mirror the ASX 200 will need to purchase Zip shares to accurately reflect the benchmark's performance.
Current Market Performance
Despite the positive news of its reclassification, Zip shares have not yet seen an immediate boost. As of now, the BNPL stock is down 0.18% at AU$1.69 per share. This is in contrast to the broader ASX 200 index, which is down 0.58% at the same time.
Looking Forward
Zip's reentry into the ASX 200 marks a significant milestone in the company's recovery journey. While the immediate market reaction has been subdued, the long-term prospects appear promising as the company's new strategic direction continues to garner investor confidence.
