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Thursday, 11 August 2022

Swvl to sell USD 20 mn in fresh stock via private placement

Cairo-born mass transport app Swvl has agreed to sell new shares to an institutional investor, giving it an important cash infusion as it restructures costs in a bid to stem widening losses. The company hopes to raise USD 20 mn with the sale of c.12.1 mn shares, which will be bought by the investor for USD 1.65 apiece at a private placement expected to close on Friday, it said in a statement (pdf) yesterday.

That’s not all: Under the agreement, the investor has the ability to purchase another c.18.2 mn shares over the next five years at the same price. If these “warrants” are exercised, Swvl will receive a further USD 30 mn in investment.

SOUND SMART- Simply put, warrants give investors the right to purchase shares at a certain price at a specific time in the future. All warrants have expiration dates: if the investor exercises the right within the time frame, they immediately purchase the stock at the agreed price, but waiting until after the expiration date will see the warrant expire.

Swvl needs the cash: The Nasdaq-listed company has embarked on dramatic cost-cutting measures this year to try and stay on track to its goal of becoming cashflow-positive in 2023. The firm has warned that losses will almost double this year, and has slashed its headcount by a third, cut executive pay and eliminated a number of unprofitable routes to support its finances.

Market reax: Swvl’s shares fell 16.4% yesterday to close at a near-record low of USD 1.53. The company’s shares have fallen 84.7% since it debuted on the Nasdaq in April via a SPAC merger.

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