August 13, 2023

Notable market news this past week (13-Aug-23)

Here is the Skeptivest roundup of the latest market headlines for the week

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🇻🇳 Vietnam EV maker VinFast to list on Nasdaq via SPAC - Biggest SEA deal in awhile

"Our objective in pursuing a U.S. public listing via a SPAC merger with BSAQ is to recognize the benefits of the U.S. capital markets without the capital raising requirements of an IPO," - VinFast

Go-ahead to de-SPAC: On Thursday, the electric vehicle manufacturer and Black Spade, the special purpose acquisition company (SPAC) backed by Lawrence Ho, a prominent figure in the Macao casino industry, announced that the shareholders of the SPAC have granted their approval for the agreement. VinFast, in a joint statement with Black Spade, said it would list on the Nasdaq under the ticker symbol VFS “on or around August 15”.

Largest SPAC and Southeast Asia deal in awhile: This deal, expected to provide VinFast with an initial equity valuation of $23b, is now in motion. SPACs encountered a surge starting in 2020, being utilized as a quicker route to public offerings. However, in more recent times, their popularity has waned due to an excess supply, increased regulatory examination, and the drop in stock prices of the companies they acquire.

Worrying fundamentals: VinFast’s Q1 revenue dropped 49% from the previous year and it posted a net loss of US$598m. In 2022, the company posted a loss of US$2.1b. It has not yet made a profit. VinFast also face strong competition from China and Tesla (which has been lowering prices). Furthermore, VinFast has faced delays in its efforts to float its shares, build a factory in North Carolina and in, a first for a Vietnamese business export cars to the US, Electric SUV exports that finally commenced this year faced unfavorable reviews and a recall.

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💰 PayPal launches its own stablecoin, PayPal USD (PYUSD)

"The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar," - Dan Schulman, president and CEO, PayPal

Benefits of PYUSD: PayPal claims that PYUSD will “reduce friction for in-experience payments in virtual environments” and allow faster and cheaper transfers between countries.

Use Cases of PYUSD: PYUSD functions for person-to-person transactions, serving both as a means to pay online and to move value across digital wallets. This currency can be exchanged for US dollars and can also be converted to or from other digital currencies supported by PayPal. Additionally, in the near future, you will have the capability to transfer your tokens between PayPal and Venmo platforms.

Regulatory Clarification...: Paxos Trust Co., which previously issued the Binance stablecoin (BUSD) until regulatory actions led to its discontinuation this year due to its association with Binance, is the entity responsible for issuing PYUSD on behalf of PayPal. But with the introduction of PayPal, a prominent mainstream fintech player, into the equation, Paxos envisions a significant turning point in stablecoin regulations.

...Or not: Bank of America says it doesn’t expect PYUSD’s launch to lead to “accelerated regulatory clarity” because the stablecoin’s issuance “does not alter systemic risk for traditional markets,” but it could face regulatory hurdles if nonbanks are ultimately banned from issuing stablecoins.

Widespread adoption unclear: “Over the longer term, we expect PYUSD to experience additional adoption headwinds as competition from central bank digital currencies (CBDCs) and yield-bearing stablecoins increases,” BofA research analysts Alkesh Shah and Andrew Moss wrote

☕️ Quick fire happenings to note

• WeWork Going Conern: WeWork has expressed significant uncertainty regarding its capacity to sustain operations. The co-working firm pointed to ongoing losses and the termination of office space memberships as the reasons for this uncertainty.‍
• Chinese Property Default: Country Garden has left investors uninformed following reports from dollar bondholders that they have not yet received their scheduled coupon payments, which were originally due on Monday. If the payments are not made within a 30-day grace period, the company is heading towards its inaugural instance of a public default.‍
• Accounting Fraud at Adani Ports and SEZ: Deloitte Haskins & Sells, the auditor responsible for overseeing the ports business of billionaire Gautam Adani is considering stepping down. This potential action could increase apprehensions about the accuracy of accounting practices within the Indian conglomerate that has come under scrutiny from the short-selling entity Hindenburg.‍
• Japan's FamilyMart exits Thailand as 7-Eleven's dominance grows: Japanese convenience store chain FamilyMart will withdraw from Thailand after its franchise agreement with local retailer Central Group ended in late May. The company announced the withdrawal on Thursday. Its roughly 200 stores in Thailand will be converted to the Tops Daily brand, a Central Group-owned small supermarket chain, over the rest of the year‍
• US CPI updates: In July, the Consumer Price Index (CPI) increased by 3.2% compared to the previous year, which was slightly under the anticipated level. The core CPI, which considers essential factors, exhibited a 12-month growth rate of 4.7%, also falling short of the projected figure. Both indicators showed a 0.2% rise over the course of the month. Almost all of the monthly inflation increase came from shelter costs, which rose 0.4% and were up 7.7% from a year ago.
• UBS Support: UBS has chosen to terminate a deal of approximately $10 billion with the Swiss government, intended to shield them from potential losses stemming from the intervention in Credit Suisse's bailout. “This is a testimony to the strength of UBS,” Chief Executive Officer Sergio Ermotti and Chairman Colm Kelleher said in an internal memo to staff.
• Challenges and Costs of Decarbonizing Air Travel: Around $5 trillion in capital investment needed to offset carbon emissions from 25,000 planes in global commercial fleet - McKinsey & Co. The amount could wipe out global airline revenue for the best part of a decade, and industry leaders say the costs of weaning air travel off fossil fuels will land on passengers.
• Moody's has lowered the ratings of 10 US banks: Notable among the smaller banks that experienced an official ratings cut are M&T Bank, Pinnacle Financial, BOK Financial, and Webster Financial. Meanwhile, larger financial entities such as Bank of New York Mellon, U.S. Bancorp, State Street, Truist Financial, Cullen/Frost Bankers, and Northern Trust are presently under assessment for potential rating decreases.