Just a day after earning 2023’s best stock market debut, which included a 624% surge from an initial $4 share price, premium golfing brand Sacks Parente saw its share price plummet by over 85% on Wednesday. It’s the kind of performance whiplash that golfers know all too well — just because you birdie on the seventh doesn’t mean you can’t triple-bogey on the eighth.
Morning Brief
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SPAC fever is back for a day.
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Amazon keeps squeezing third-party sellers.
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EY keeps renewing its vows.
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EVs
EV Maker VinFast Bags Huge Valuation in SPAC-Mania Redux
A Vietnamese EV startup just leapfrogged legacy automakers by way of a SPAC, but that may have been the easy part.
VinFast listed on the Nasdaq via SPAC on Tuesday, en route to a closing-day valuation of $85 billion. That put it ahead of legacy automakers including Volkswagen ($69 billion), Ford ($48 billion), and GM ($46 billion). The debut comes as the EV market grows more cutthroat, with Tesla, the most valuable automaker in the world ($739 billion), looking set to unleash a new price war.
Hanoi Dreaming
VinFast started life in 2017 as a traditional fossil-fuel-guzzling automaker, but announced it would stop selling non-EV models by next year in favor of its EVs. This year, it sold 16,000 cars and started delivering to the US in March, where it has only sold 137 vehicles so far. Meanwhile, Tesla delivered 1.3 million cars in 2022, and Chinese EV maker BYD sold 1.8 million. VinFast also chalked up a loss of $2.1 billion last year.
SPACs are a volatile way to go to market, as seen by the stock’s decline of 19% on Wednesday. But VinFast’s debut also shows that there’s still clearly room in investors’ eyes for newly public companies in high-growth markets. The question for VinFast is whether it can avoid the downfalls that met other SPAC-loving EV players:
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EV automaker Lucid Motors went public via a SPAC in 2021 at a valuation of $24 billion, and market capitalization now sits at $14.6 billion.
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Beleaguered EV-maker Nikola also used a SPAC in 2020; its valuation has declined by more than half to $1.5 billion.
VinFast’s market debut is a strange flashback to SPAC fever, but CEO Le Thi Thu Thuy told CNBC that a SPAC wasn’t its first choice. “We were ready to do a traditional IPO. We pursued the path for almost two years but the markets have been challenging so we decided to decouple the listing from the fundraising.”
With such a chunky valuation, VinFast needs to put the pedal to the metal to step up production — especially since Thuy promised it would sell 50,000 vehicles this year, meaning it has four months and change to sell more than double the number of cars it has sold so far. Given Tesla announced two price cuts to its China models within the space of three days, VinFast execs might be starting to sweat.
That’s A Lot of Energizer Bunnies: On Wednesday, a battery manufacturer and one of Tesla’s big suppliers said it’s made a battery capable of fast-charging an EV to 250 miles of range within 10 minutes. Since one of the biggest hurdles for prospective EV buyers is “range anxiety,” this is a very exciting announcement for Elon Musk and Co. That is, if he can tear himself away from patrolling for Mark Zuckerberg.
– Isobel Asher Hamilton
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E-Commerce
Amazon Levies New Fees on Third-Party Merchants
If you’re going to sell with Amazon, you better sell with Amazon. Capiche?
Starting in October, the e-commerce boss will levy an additional fee on third-party merchants who choose to sell on Amazon without using its accompanying logistics and fulfillment service, according to reporting from Bloomberg.
We FT-See You
The new 2% fee for indie fulfillers is on top of the usual 15% commission already taken by Amazon, which itself is still just a piece of Amazon’s overall cut. Last year, for the first time ever, the e-commerce giant took more than 50% of third-party seller revenue through various fees and charges, according to a study by Marketplace Pulse. The new 2% dig is levied against merchants who use the Seller Fulfilled Prime service, a sort-of accreditation program that verifies consistently speedy third-party delivery — often used by merchants selling and shipping large items like sofas that can cause headaches when enmeshed in Amazon’s own warehouse systems.
According to Bloomberg, Amazon didn’t explain why the new fee is required, though several merchants told Bloomberg they interpreted the charge as a pressure campaign to sign up for the logistics service. Amazon did, however, tell Bloomberg that the new fees are set to cover the costs of maintaining indie fulfillers’ separate infrastructure. It’s a bit of a flex, given Amazon is gearing up for a major fight with the FTC over allegations it wields too much of its e-commerce market power over third-party sellers:
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The FTC is already expected to claim that Amazon coerces third-party sellers into using its logistics services by rewarding those who do with higher search result placements and punishing those who don’t with buried listings, sources told Politico earlier this summer.
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Overall, its third-party Seller Services segment generated over $32 billion in Amazon’s second quarter, up 18% year-over-year, and roughly $10 billion more than its Web Services, and with higher profits.
Prime Position: Make no mistake, Amazon is Gulliver among Lilliputians in the e-commerce space. The firm routinely accounts for nearly 40% of all US e-commerce sales, according to Insider Intelligence, which is roughly 6 times more than runner-up Walmart. That’s certainly enough to catch FTC Chair Lina Khan’s attention — and ire.
– Brian Boyle
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Investing Truths: In Vino Veritas
2022 was not exactly a banner year for most asset classes.
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Ernst & Young’s audit and consulting businesses just can’t quit each other.
In the latest round of declaring their newly renewed everlasting love, EY recently rejected a bid from private equity giant TPG to take a stake in the consulting business and complete the firm’s now-scrapped divorce, according to a report Wednesday from the Financial Times. Fittingly for accountants, it seems love, like taxes, springs eternal.
Scaling Down Mount Everest
EY had its own plans to consciously uncouple its two major arms — an initiative internally dubbed Project Everest. The math was pretty simple: Spin off the consulting practice in search of an eventual $100 billion enterprise value on the stock market, enriching partners and freeing both arms from pesky conflict-of-interest rules in the process.
But EY ultimately decided it was better off sticking together, though that wasn’t enough to keep private equity at bay. In late July, the FT reports, TPG made its proposal — which highlighted why it could succeed where Everest failed:
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According to the FT, TPG’s proposal included a more even split of the firm’s tax practice — which would have been mostly grouped in with the spun-off consulting arm under Project Everest, to the chagrin of some company partners.
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The private equity group also said that a private transaction would free the firm from the finicky reaction of public markets and lead to less dilution of partners’ stakes.
Rejection: It’s unknown how much the $137 billion private equity player offered for the consulting firm in its proposed debt-and-equity deal, but EY turned it down nonetheless. “We frequently receive inquiries from private equity firms and other investors expressing interest in parts of EY businesses. This was the case before Everest and will continue into the future,” Carmine Di Sibio, EY’s global chair and CEO, told partners in a note. Complicating any move forward is Di Sibio’s succession plan. The executive is due to retire next June, and has yet to pick a replacement. Yes, this is another major institution of corporate America embroiled in succession drama.
– Brian Boyle
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Extra Upside
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Wait a minute: Fed minutes from July meeting reveal just how split board was on rate-hiking pause.
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Chip crunch: Intel backs down from $5.4 billion acquisition of Tower Semiconductor.
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Bye, Batman: ‘Barbie’ surpasses ‘The Dark Knight’ as Warner Bros’ all-time domestic box office performer.
