Valuation velocity
Vietnamese EV startup VinFast completed its merger with a SPAC on Monday and its shares soared 68% on its first day of trading — catapulting its valuation to $86 billion, above automotive giants like Volkswagen, Ford, and GM. However, by Wednesday its shares had seen a sharp drop of around 19%.
The rollercoaster debut of VinFast is a familiar tale in the world of SPACs, or special purpose acquisition companies — essentially, a public company with a big blank check that buys a private one. SPACs offer quicker routes to public markets, while skipping some of the due diligence of the traditional IPO process.
SPACs boomed in 2020/21, when they represented a fashionable way to take Silicon Valley's hottest startups public, with prominent examples including the personal finance app SoFi and electric truck company Nikola. Even the likes of WeWork, after its notorious IPO debacle, managed to find solace in a SPAC, and Buzzfeed, the digital media trailblazer, also embraced the trend.
Buzzworthy blunders
Nevertheless, numerous companies that chose the SPAC route have become noteworthy for high-profile missteps under glaring public scrutiny and ongoing struggles with profitability. Buzzfeed was forced to shutter its Pulitzer Prize-winning news division, Nikola's founder Trevor Milton has faced criminal fraud charges, and Bird, a SPAC-aided electric scooter company, admitted to inflating its revenue figures for over 2 years. But it's the plight of WeWork that has occupied headlines in recent weeks: once valued at a staggering $47 billion, it is now worth <$350 million, teetering on the brink of being delisted from the New York Stock Exchange.
Now, as VinFast navigates the post-merger SPAC road, it will be trying not to skid out like so many of its recent predecessors.
