#spac Archives - Hexcellence Consulting

On August 15, 2023, VinFast Auto Ltd. (NASDAQ: VFS), a Vietnamese electric vehicle company owned by Vietnam’s wealthiest individual, Pham Nhat Vuong, successfully merged with Black Spade Acquisition Co., a special purpose acquisition company under the stewardship of Lawrence Ho Yau Lung and was successfully listed on the NASDAQ stock market. On its debut trading day, VinFast’s stock price increased by an astonishing 254.64%, briefly propelling its market capitalization to approximately $86.05 billion, solidifying its leading position in the Vietnamese electric vehicle sector.

▲ VinFast’s CEO, Le Thi Thu Thuy

During the bell-ringing ceremony, VinFast’s CEO, Le Thi Thu Thuy, expressed optimism, stating, “Listing on the U.S. capital market represents a monumental achievement for us. This listing opens doors to our future engagement with the capital market.” Today’s success not only highlights VinFast’s commitment to sustainable global mobility but also presents opportunities for expanding its presence in the capital market and future growth.

As VinFast expands beyond Vietnam, the company is preparing to unveil three innovative vehicle models. Concurrently, VinFast’s factory in North Carolina, USA, has begun operations, marking a significant step in the company’s global expansion and the development of its North American supply chain.

It’s worth noting that prior to VinFast, the only Vietnamese company to enter the U.S. capital market was Cavico Corp (“Cavico”). Cavico achieved Nasdaq listing status with the ticker symbol CAVO on September 18, 2009. Regrettably, Cavico was delisted from Nasdaq less than two years later due to non-compliance with disclosure requirements. Since then, no Vietnamese company has managed to penetrate the U.S. market successfully.

VinFast’s successful entry into the U.S. market not only signifies their remarkable achievement but also serves as an inspiration for other Vietnamese enterprises seeking international expansion. This accomplishment challenges the notion that Vietnamese companies cannot thrive in foreign markets, offering boundless possibilities for those aspiring to follow in VinFast’s footsteps.

On June 30, 2023, Bukit Jalil Global Acquisition 1 LTD (“BUJAU” or the “Company”) (NASDAQ: BUJAU), a special purpose acquisition company (“SPAC”) headquartered in Kuala Lumpur, Malaysia, successfully made its debut on the Nasdaq. BUJAU announced the completion of its initial public offering (IPO), raising US$57.5 million by issuing 5,750,000 units at a price of US$10 per unit. The units have been trading on the Nasdaq stock exchange since June 28, 2023, under the ticker symbol “BUJAU.”

BUJAU is sponsored by Bukit Jalil Global Investment Ltd., the company aims to engage in business combinations with one or more businesses or entities through mergers, stock exchanges, asset acquisitions, stock purchases, reorganizations, or similar business combinations. The company is actively seeking a potential target business, without any specific industry or geographic limitations.

Although BUJAU has not yet identified its target industry, its focus will be on emerging growth companies that already generate or have the potential to generate cash flows. Neil Foo, the Chairman and Director of BUJAU, “We have certain targets in mind, such as asset-light, tech, and healthcare companies. We will broadly consider companies that have an asset-light structure, strong management and technology, particularly those with high growth potential and significant market opportunities.” By going public through a SPAC, the company gains access to more international options.

BUJAU is not the first ever Malaysia-based SPAC in the market. Prior to BUJAU, there were others Malaysian-based SPACs listed on Nasdaq, such as Fellazo Inc. (“Fellazo”) (NASDAQ: FLLCU), which conducted its IPO in July 2019. However, Fellazo was unable to secure a qualified business combination or asset injection within the designated timeframe and was subsequently delisted.

Additionally, Kairous Acquisition Corp. Ltd. (“Kairous”) (NASDAQ: KACLU) is listed in December 2021 and has recently announced a one-month extension for the completion of a business combination from July 16, 2023, to August 16, 2023. The purpose of the extension is to provide time for Kairous to complete a business combination.

What is SPAC?

A Special Purpose Acquisition Company (SPAC) is a type of company that is created with the sole purpose of raising funds through an initial public offering (IPO) with the intention of merging with or acquiring one or more existing businesses or assets. SPACs are often referred to as “shell” companies because they have no specific business plan or operations at the time of their IPO. Once the SPAC has raised enough funds, it will begin the process of identifying and acquiring suitable targets, which is known as the “De-SPAC” process.

Benefits of Merging with SPAC

1. Shoter Public Listing Timeline

The SPAC merger process is typically faster than the traditional IPO process. The SPAC is already a publicly listed company, so the target company can become a public company through a merger with the SPAC in a matter of months, rather than years or more than an IPO process typically takes.

2. Lower Listing Costs

The cost of going public through a SPAC merger is lower than the cost of an IPO. In IPO, the company must pay underwriting fees to investment banks and other expenses associated with the offering. In contrast, the SPAC sponsor typically paid all the listing cost including SEC Counsel fee, leaving more capital for the target company.

3. Reduced Regulatory Scrutiny

The regulatory requirements associated with an IPO can be extensive and time-consuming. A company going public through a SPAC merger may face less regulatory scrutiny, as the SPAC is already a public company that has gone through the IPO process.

4. Greater Valuation and Fundings Certainty

A SPAC merger offers companies more certainty in terms of valuation and funding compared to a traditional IPO. By merging with a SPAC, the company can negotiate terms and ensure a certain amount of funding from the SPAC’s existing pool of capital. This can provide greater financial stability for the company, whereas a traditional IPO can be more unpredictable in terms of the amount of funding raised.

5. Access to Experienced Investors

The investors who back the SPAC are often experienced and well-connected in the financial industry. This can provide the target company with access to valuable contacts, advice, and resources.

Difficulties in Merging with SPAC

1. Lack of Suitable SPAC

There may be a limited pool of suitable SPACs available for merger, particularly if the target company has specific industry or geographic requirements. This can make it difficult for the target company to identify a suitable partner that aligns with their strategic goals.

2. Competition for SPAC

The increasing popularity of SPAC mergers has led to a competitive market for SPACs, with many target companies lying for the attention of a limited number of potential partners. This can make it difficult for the target company to stand out and secure a merger partner that is a good fit.

3. Mismatch in Valuations

The target company may have difficulty finding a public shell company that values the company appropriately. If the target company’s valuation is too high or too low compared to the SPAC’s expectations, the merger may not be feasible or may require significant negotiation to reach agreement on the terms.

4. Shareholder Disagreement

When merging with a SPAC, shareholder disagreement and the risk of money withdrawal are potential challenges for the target company. Shareholders may vote against the proposed merger, which can lead to the redemption of shares for cash and a reduction of available capital.

Three IPOs and four SPAC went public in the week of June 13, 2022 led by Lytus Technologies (NASDAQ: LYT) Indian provider of content streaming and telecasting services, raised $12 million at a $175 million market cap and finished 389% below its IPO price.

The one SPAC went public this past week are:

1. Feutune Light Acquisition (no selected target industry)

Together, all the SPACs raised a total of $85 million.

One IPOs and one SPAC went public in the week of June 6, 2022 led by Phoenix Motor Inc (NASDAQ: PEV), a maker of electric vehicles and drive systems being spun out of SPI Energy, raised $16 million at a $155 million market cap and finished 57% below its IPO price.

The one SPAC went public this past week are:

1. Acri Capital Acquisition (technology-enabled sectors in North America SPAC)

Together, all the SPACs raised a total of $75 million.

#spac

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