VinFast’s 400% surge is an anomaly for beaten-down Spac industry

VINFAST Auto’s 400 per cent surge after going public in a special purpose acquisition companies (Spac) merger earlier this month is the lone bright spot for blank-check deals completed in August.

Beyond the Vietnamese electric-vehicle (EV) maker, investors who have held on to shares of newly public companies from tie-ups with Spac have mostly endured nothing but losses.

All told, 11 firms have closed mergers with Spacs this month, the most active stretch since February, Spac Research data analysed by Bloomberg show. Nine of those stocks are trading below the US$10 mark at which Spacs go public, with a median slide of 41 per cent since their debut as investors shed the low-float firms.

Spacs enable investors to redeem their shares for US$10 plus interest when they vote on deals to be completed, something that has left dozens of stocks trading with just a tiny pool of shares available. Investors redeemed 91 per cent of the shares in de-Spacs that debuted this month on average, the Spac Research data show. The result has been some wild swings ending in sharp losses.

Better Home & Finance Holding, which started trading on Aug 24, is the worst-performing company to merge with Spac in August, sinking 95 per cent. Among other laggards are ESGL Holdings and Noco-Noco, each of which are down more than 70 per cent from when they debuted. In total, 43 of the 55 companies that have gone public via Spac this year are trading in the red with a median loss of 55 per cent, according to data compiled by Bloomberg.

Since its Aug 15 debut, VinFast has seen its market value surpass Ford Motor and General Motors combined, making the EV company bigger than 420 members of the S&P 500 Index. Its value on paper is US$121 billion.

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However, with just 1 per cent of VinFast shares available for trading, the stock’s wild run is drawing comparisons to AMTD Digital, another US-listed company with roots in Asia, which has tumbled more than 99 per cent from its peak. VinFast’s rally is starting to ebb, with the shares falling as much as 41 per cent on Tuesday, showcasing how risky trading low-float stocks can be.  

Since the start of 2020, when blank checks became a pandemic investing trend, more than 15 de-Spacs have gone bankrupt while 160 of the roughly 400 companies trade below US$2, a more than 80 per cent plunge from the price at which Spacs typically go public. BLOOMBERG