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Tuesday, 15 March 2022

Swvl expects US regulators to greenlight its Nasdaq IPO today

Mass transportation startup Swvl expects to receive final approvals on its IPO from the US’ Securities and Exchange Commission (SEC) today, CFO Youssef Salem told Enterprise. The Egypt-born ride-hailing app is set to go public on the Nasdaq through its merger with US SPAC Queen’s Gambit Growth Capital by the end of the month, Salem added, pending sign-off from Queen’s Gambit at its general assembly meeting on 30 March.

Refresher on the transaction: The company will list 35% of its shares on the exchange (c. 50 mn shares) and still plans to invest USD 250-300 mn over the next three years to expand its global footprint after it goes public, Salem confirmed.

The backdrop: It’s impressive that Swvl looks set to cross the finish line given the headwinds SPACs (and the Nasdaq) had faced:

  • SPACs are getting smacked: Investors are demanding their money back from SPACs post-IPO like never before. Redemption rates soared to 90% in February, up from just 14% a year before.
  • And canceled: The number of SPAC mergers terminating before the IPO is soaring. After 2020 saw only seven SPAC failures, around two dozen have been canceled since the middle of last year, including at least six in the first six weeks of 2022. Two — Kredivo and Memic — have been canceled in the past week alone.
  • Driving the SPAC-off: An extended sell-off in tech stocks. The Nasdaq has fallen into bear market territory due investor concerns over inflation, rising interest rates and the war in Ukraine, and is now down 21% from its peak in November.

This is forcing companies to turn to new sources of funding: Funds such as alternative asset manager Atalaya Capital Management and PE giant Apollo have been agreeing with companies to purchase shares from exiting investors, a form of investment known as redemption capital, according to the FT.

Anghami beat Swvl to the punch for the Middle East’s first US tech listing — but saw mass redemptions: Shareholders traded in 9.8 mn of the SPAC’s 10 mn shares for cash on its first day of trading in February.

Swvl isn’t worried about volatile conditions: “We are not concerned because we have a pipeline of fully committed capital, between the PIPE investments we’ve received and non-redemption agreements that we’ve signed with Queen’s Gambit’s investors,” Salem told us.

What PIPE investments? The startup received a USD 21.5 mn funding boost last month from the European Bank for Reconstruction and Development (EBRD) and auto parts maker Teklas’ VC arm Teklas Ventures, in a private placement (PIPE). The latest investment took Swvl’s expected PIPE finance to USD 121.5 mn. Other PIPE investors include our friends at Chimera as well as Agility, Luxor Capital Group, and Zain Ventures.

Advisors: Law firm Ibrachy & Dermarkar is Swvl’s legal advisor on the merger, while Vinson & Elkins and Shahid Law Firm are acting as advisors for Queen’s Gambit.

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