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Seize’s $28 Billion Market Plunge Reveals Perils of SPAC Mergers

Seize’s  Billion Market Plunge Reveals Perils of SPAC Mergers

Seize Holdings Ltd.

, the Southeast Asian superapp that set a excessive watermark for SPAC mergers final 12 months, has rapidly turn into one of many market’s largest post-listing flops.

On Thursday, Seize’s shares plunged 37% to $3.28 apiece after the corporate launched its 2021 outcomes, taking its market capitalization all the way down to round $12 billion. The Singapore-headquartered firm reported a 44% drop in fourth-quarter income to $122 million, and stated it booked barely any income from meals deliveries due to greater incentives it paid out to spice up enterprise volumes. Extra spending is within the playing cards, its executives stated.

Like Western platforms akin to

Uber Applied sciences Inc.

earlier than it, Seize has been combating costly battles for market share with different well-funded rivals and startups, successfully boosting driver pay and chopping prices for patrons to extend market share.

That progress technique—usually seen in firms that, like Seize and Uber, are backed by

SoftBank Group Corp.

—has fallen from favor as world traders have soured on shares of firms that can take years to turn into worthwhile. India’s

One97 Communications Ltd.

, one other SoftBank-backed firm and the proprietor of cell funds community Paytm, has slid greater than 60% beneath its preliminary public providing value since itemizing in November 2021.

Seize can also be the most recent in a string of so-called “de-SPAC” offers which have carried out poorly within the inventory market following final 12 months’s issuance increase. Particular-purpose acquisition firms elevate cash and checklist earlier than discovering companies to merge with, and have offered an alternate and sooner route for a lot of much less established startups to go public. However some firms that merged with SPACs have since undershot the enterprise projections that earlier helped attract traders.

An exchange-traded fund referred to as the

De-SPAC ETF,

which holds shares of 25 firms—together with Seize,

WeWork Inc.

and

SoFi Applied sciences Inc.

—which have gone public by way of SPACs, has fallen greater than 30% to date this 12 months.

“There’s nonetheless a stigma for firms that come public by SPACs,” stated

Matthew Tuttle,

chief govt and funding chief of Tuttle Capital Administration LLC, which is the adviser to the De-SPAC ETF. “There’s some crappy offers on the market, and it’s guilt by affiliation.”

Seize on Thursday posted a $1.1 billion quarterly loss, taking its 2021 losses to $3.6 billion. The corporate, which operates in eight nations, posted annual income of $675 million, up 44% from the 12 months earlier than, and gross merchandise worth that topped $16 billion.

The corporate’s forecasts for gross-merchandise-value will increase within the subsequent few quarters, nonetheless, appeared to fall in need of a 2022 progress projection that Seize had made final spring, in line with

Sachin Mittal,

head of web and telecom analysis at DBS Financial institution Ltd.

Seize’s shopper incentives, or the quantity of reductions and promotions provided to prospects, greater than doubled to $365 million for the fourth quarter. The corporate stated companion incentives, or these granted to drivers and retailers Seize works with, rose 74% to $218 million.

“The Seize outcomes had been definitely disappointing,” stated

Nirgunan Tiruchelvam,

head of shopper fairness analysis at Tellimer, including that the corporate spent greater than anticipated on incentives.

Personal firms are flooding to special-purpose acquisition firms, or SPACs, to bypass the normal IPO course of and achieve a public itemizing. WSJ explains why some critics say investing in these so-called blank-check firms isn’t well worth the threat. Illustration: Zoë Soriano/WSJ

Seize plans to proceed investing in driver incentives to get well driver provide as demand for ride-hailing providers get well after pandemic-related lockdowns within the third quarter. “It’s going to take about one or two quarters for us to get to the proper equilibrium for demand and provide to match collectively,” finance chief

Peter Oey

informed analysts Thursday.

“We’re specializing in executing the enterprise, and we really feel that the inventory value will deal with itself,” Mr. Oey stated in a separate interview with The Wall Road Journal.

Citigroup Inc.,

in a word to shoppers after the outcomes, stated it views Seize’s selloff as a shopping for alternative. “We imagine broad market weak point amid geopolitical instability might need prompted some traders to chop losses on their place,” Citi analysts stated. The Russia-Ukraine warfare has led to volatility in markets.

Seize is also dealing with stiff competitors from suppliers of comparable providers in Southeast Asia like Singapore-based digital video games and e-commerce large

Sea Ltd.

, and Indonesia-based GoTo, which is non-public and has plans to go public.

Sea, which can also be listed in New York, produces much more income than Seize, however it is usually loss-making and its market capitalization has fallen 55% over the past three months to about $61 billion, in line with FactSet. The corporate earlier this week stated its fourth-quarter income greater than doubled to $3.2 billion, however its web loss widened to $618 million because it additionally spent closely on rising market share.

“Somebody has to cease burning money,” stated Mr. Mittal, the DBS analyst, including that traders finally wish to see firms having a transparent path to profitability.

Write to Dave Sebastian at dave.sebastian@wsj.com

Copyright ©2022 Dow Jones & Firm, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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