SWVL Holdings (NASDAQ:SWVL), a Dubai-based transit software company, jumped 50% on speculation on Stocktwits that the company might survive. SWVL stock closed at 10 cents per share on Dec. 21 and was trading at nearly 15 cents in pre-market trading on Dec. 22.
SWVL came public in April through a special purpose acquisition company (SPAC) at $10 per share. The company has since conducted multiple layoffs, trying to become cash flow positive. Most recently, it laid off half its staff of 900 in November.
The SWVL Stock Story
SWVL launched in Egypt in 2017 before moving to Dubai. It offers shared trips in vans or buses using an app, mainly in the developing world. Think of it as similar to Uber (NASDAQ:UBER), whose value lies in its software.
In the go-go market of 2021, SWVL bought operators in Europe and South America, expanding from a base in the Middle East. The SPAC was worth $1.5 billion when it was launched, delivering a private investment in public equity (PIPE) of $121.5 million. After the initial public offering (IPO), the company continued to grow for several months, signing a deal with a Kuwaiti service to use its software in August.
Soon after the IPO, SWVL was promised $600 million from B. Riley Principal, based on certain conditions. B. Riley invested in Core Scientific (NASDAQ:CORZ), a crypto miner that declared bankruptcy this week.
In its most recent financial report, for the half-year ending in June, SWVL reported a loss of $161 million and revenue of $40.7 million. The operating loss was $71 million. The unaudited report claimed the company had $19 million in cash at the end of the period and negative $76 million in operating cash flow. What kept it afloat was $97 million in investment cash flow, mainly from stock sales.
What Happens Next?
My guess is that what happens next, as with Core, is bankruptcy. It’s part of a general trend where regional startups crash on the global demand for profits rather than growth.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.