In the ever-evolving landscape of tech-driven mobility solutions, Swvl Holdings Corp has recently presented a financial scorecard that showcases a noteworthy rebound in earnings, but not without casting shadows over its revenue performance. The Nasdaq-listed company, a prominent player in enterprise and government mobility solutions globally, is making headlines for its resilience amid economic headwinds, yet questions linger about the sustainability of its financial turnaround.
Earnings vs. Revenue: A Delicate Balance
The latest financial report for the first half of 2023 unveils a stark contrast between Swvl’s earnings and revenue. While the company boasts positive figures in operating cash flow and net profits, the revenue picture paints a less rosy scenario. The figures present a financial narrative where earnings are the shining star, but revenue remains a stumbling block.
Earnings in the Spotlight:
One cannot ignore the commendable achievements in Swvl’s earnings. Operating cash inflows of $2.2 million in H1 2023, compared to the staggering outflows of $76.8 million in H1 2022, highlight a strategic pivot that merits applause. The gross profit of $1.8 million in H1 2023, in contrast to the gross loss of $2.7 million in H1 2022, signals a significant boost in operational efficiency. The operating profit’s impressive shift from a loss of $56.0 million to a profit of $13.4 million showcases the effectiveness of the portfolio optimization program initiated last year.
Most striking is the reversal in net profit, transforming from a daunting net loss of $161.6 million in H1 2022 to a positive net profit of $2.1 million in 2023. CEO Mostafa Kandil attributes this success to the team’s adept handling of a macroeconomic downturn, crediting the completion of the portfolio optimization strategy.
Revenue Woes:
However, the celebration of earnings is tempered by the less-than-stellar revenue figures. Swvl reports a decrease in revenue from $21,671,391 to $11,116,013, signaling challenges in generating top-line growth. The drop raises critical questions about the company’s market positioning, the impact of its strategic decisions, and the adaptability of its business model.
The sale of subsidiary Urbvan, representing approximately 7% of Swvl’s IFRS revenues, for gross proceeds of $12 million, adds another layer to the revenue puzzle. The move prompts industry observers and investors to ponder the implications for future revenue streams and the overall strategic direction of SWVL.
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard.
Mostafa Kandil is the co-founder and CEO of SWVL, an Egyptian mobility startup. As a reminder, SWVL is a platform that aims to revolutionize public transportation in major cities. Kandil started this journey in 2017 as a university student in Egypt, living in Cairo. At that time, he noticed a gap in the public transportation system, and together with his friends, decided to address this issue. SWVL made waves by going public on the American stock market in 2021 through a Special Purpose Acquisition Company (SPAC), but since then, the company has faced challenges, with a significant drop in its market value. In a recent interview with Swalif Business monitored by Afrikan Heroes, Kandil shared his latest experience at the helm of affairs of SWVL.
Woeful Outing on Nasdaq
In 2021, we decided to go public. It’s logical for many companies not to want to go public, as no one might be interested in acquiring them. At that time, people couldn’t envision it, but we decided to go public right away. We benefited from coverage, but we faced a tough market, and the business dropped by half. In 2020, we lost 93% of our revenue. Only 3% of revenue remained. It went down significantly, and we persevered for four months without any income. This occurred during a time when there were no lockdowns. For instance, Cairo’s economy wasn’t affected, and people there weren’t staying at home. We had to weather the storm for four months until things started to normalize. During this period, the community declined significantly, and we saw investors and employees losing faith. We remembered our initial commitment not to let anyone profit during this challenging period. We didn’t cut employees’ salaries, but we did cut other expenses. I was personally covering nearly 100% of everything, excluding employee salaries, as we had discussed earlier.
Numerous issues arose, or went unresolved with companies that went public through the Special Purpose Acquisition route, as those companies failed to meet their promised targets. Many companies, especially those solely on paper, were unable to deliver on their claims. Several might have even profited from these schemes. When they entered the market, they were primarily companies with just ideas and lacked substantial operations. As people often say, nobody was fixing these problems. Unfortunately, we got embroiled in this entire situation. We became part of a war; and the internet boom, among other factors, greatly impacted us. The markets were highly volatile, with fluctuations as high as 60%. In currencies and other areas, it felt like a storm. Like idealism, the SPAC market collapsed within the first six months of the IPO.
We had investors, including significant ones from Russia. However, the war caused them to reconsider their investments. They decided not to put more money into the company or, if they did, they demanded the ability to sell their stock. The very next day, we already knew the market was collapsing. We stood firm and refused to let them withdraw their commitments. Those investors were the first to sell off their stocks, and as the markets plummeted, even the stock we bought from them was rendered almost worthless. The global financial crisis had begun, and everyone was panicking. Investors abandoned the ship, which in turn exacerbated the situation.
This, in addition to other points we’ve mentioned, had an impact on employees. Employees were not previously concerned about the stock’s value. They understood how the company operated and knew it was a robust business. Our faith was unwavering, and the stock’s value didn’t mean much to us. Regardless, it created a crisis, and it was disheartening to see how the employees who had worked diligently saw their stock options lose value.
The employees began to sell their stocks and depart. There was no clear objective behind it. It wasn’t my stock, and I had no control over the situation. Those were the investors, and some of them were major players like Apple. They initially invested in the IPO, but the market was no longer favorable for them. They made their exit. In a crisis, employees often sell and move on. Purely from a financial perspective, I believe they sold because they saw little value in the stocks. I didn’t have any say in the matter, as the investors were the ones in control. Initially, our investors included large players like Apple.
On the Strategies Behind SWVL’s several acquisitions
We purchased companies, and we did so without using cash. We acquired these companies through stock transactions, paying their value in shares only. We bought all these companies at a fixed price per share, all done without cash payments. We paid them based on certain multiples that were considerably lower. Therefore, we made a profit with every acquisition, buying these companies without needing to expend cash, only using shares. We continued buying companies using shares without any out-of-pocket expenses. At present, these companies are part of your business. Yes, these companies are now integrated with us, and they were instrumental in our growth. We did have to let go of some companies as our performance declined, but others remained and played a crucial role in our success.
SWVL’s stock was at risk of being delisted?
It didn’t reach that point; we implemented a stock split, a technical financial maneuver. Instead of having a stock valued at one dollar, we divided it into two one-dollar stocks. It was a precautionary measure to prevent delisting. When you’ve been listed for more than thirty days, it’s possible to merge stocks and start afresh. But this is a real danger indicator. It signifies that you’re not meeting the numbers. Even when things get tough, we don’t plan on leaving Nasdaq. Nasdaq is a financial market. To be there, you must comply with legal regulations, essentially behaving as a public company. There are others in this market too. But stock prices in Nasdaq can recover, and the merger process continues.
Mostafa Kandil is a co-founder and CEO of SWVL. Credits: SWVL
SWVL’s Current value?
I won’t provide exact figures, but some people have sold due to various factors, such as market sentiment or low daily trading volumes. Even if the trading percentage is small, it impacts stock prices. A high price is good because it signifies that even if immediate buyers are scarce, most initial investors saw the company’s true value beyond its stock price. We aim to reach the highest potential. Some companies have restrictions that prevent investors from selling before a specific time, like six months from now. We’ve been in a similar situation before, and the stock initially dropped from ten to four, but it later rebounded to a remarkable extent. Investors extended the offering period because they saw the company’s real value was much higher than the stock price.
Employee Reduction
In 2022, we let go of about a third of our employees. It was challenging, as I met many of these employees for the first time. We had to reduce costs to exit certain markets, such as Portugal. We focused on sectors where we were more profitable and cut back in areas where we weren’t. I believe in 100% transparency. I share everything that happens in the company with the employees. We consider ourselves the first employees of the company, and I emphasize that we’re all in this together.
Market Presence
Initially, we were in six countries, but by the time of the IPO, we had expanded to ten and then scaled back. Now, we operate in three countries.
On Delisting from Nasdaq, and Going Private
Indeed, there were such speculations. Some believed that the company’s diverse operations might benefit from being taken private. They claimed the company itself generates revenue. I won’t delve into specifics. I would consider starting with approximately half of the company, no more, I would say.
The challenges SWVL faced as it entered new markets and how it managed to overcome them
Our ambition has always been to be a part of the global community. We hope and aspire to it. For us, entering new markets is a challenge due to the differences in language and culture. We wanted to learn and engage with various cultures. At a time, we were in Kenya, four hours away from Cairo. It presented a similar time constraint. Our goal was clear, but Kenya posed a significant problem with the absence of public transportation services. Everything was disorganized, and I bought a bus and started a service on my own; there was no established public transport system. In Egypt, there was also a lack of public transportation services.
That’s how challenging it was. Within six months, we managed to acquire fifty buses. It was a daunting task, given that the existing system had been in place for decades. We entered the market and offered a vastly improved quality of service compared to the informal transport network. We realized that the organization needed proper regulation. The regulatory body is known as National Transport and Safety Authority’s (NTSA) if I remember correctly. The board of directors primarily consisted of individuals from the informal transport network.
The Kenyan Nightmare
The same regulatory framework was created by those who initially benefited from it. The members of the board of this regulatory body in Kenya were the same individuals who owned informal transport buses. Exactly, they were our initial competitors. They attempted to hinder our progress and work against us. We were competitors, but we were not compelled to operate outside the law. However, we had no other option. Our staff were arrested and released from prison on the same day. They even included my name in the records and placed it in a specific location. A significant number of them were corrupt. Thankfully, we managed to overcome these challenges. When you meet the right people in a country, engage with them, and provide a service that benefits the public, you can succeed.
How SWVL adapt its services to different countries with unique cultural and geographical aspects
The cultural aspects of people vary significantly. For instance, in Kenya, people are willing to walk to the bus station, and if it takes them more than five minutes to reach the station, they won’t use the service. We always had to be within a five-minute reach for our customers. If they choose to take cars, the service demand drops significantly if they have to walk for more than five minutes. For instance, in Kenya, people don’t mind walking a bit if there is a reasonable distance, as it aligns with their lifestyle. They wait for the bus and are comfortable with more passengers getting on. However, they do have a problem with long delays. Thus, each country has its unique characteristics, and the city’s geography plays a significant role. In some cities, the residents both live and work in the same area. In such areas, you can establish a public transport company that connects points throughout the day. However, in a city like Nairobi, there are suburbs where people commute from the outskirts to the city in the morning for work and return to the outskirts at the end of the day. In these cases, the buses operate accordingly. Coastal cities have their own dynamics. In a city built entirely along the coast, you can offer a service similar to that in Cairo, launching it from various locations. Our approach has always been to provide services that cater to the needs of the people in a specific geographic area.
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard
Swvl Holdings Corp, a global provider of tech-enabled mass transit solutions, has announced that two of its key board members, W. Steve Albrecht and Gbenga Oyebode, have resigned from the company’s board of directors and audit committee. This has resulted in the company no longer complying with Nasdaq’s audit committee requirements as set forth in Listing Rule 5605, thereby attracting a latest warning notice from the US Securities and Exchange Commission.
Listing Rule 5605(c)(2) requires the Company’s audit committee to consist of at least three members, all of whom are independent. With the resignations of Albrecht and Oyebode, the Company’s audit committee now consists of only one remaining member.
The company has until June 15, 2023, to regain compliance within the “Cure Period”. Swvl is currently in discussions with its existing directors to determine who will join the audit committee, and the company anticipates regaining compliance within the Cure Period.
Swvl is a provider of intercity, intracity, B2B, and B2G transportation, offering semi-private alternatives to public transportation for individuals who cannot access or afford private options. Swvl’s parallel mass transit systems empower individuals to go where they want, when they want, making mobility safer, more efficient, accessible, and environmentally friendly.
Director since 2022, W. Steve Albrecht is on the board of Sky West, Larry H. Miller Group of Cos., CoreLogic, Inc. and Oravel Stays Pvt Ltd. and is a Professor-Emeritus at Brigham Young University. On April 7, 2023, he notified the board of directors of his resignation from his position as a member of the company’s board of directors and as an independent member of the audit committee.
Gbenga Oyebode, co-founder and former chairman of Aluko & Oyebode, one of the largest law firms in Nigeria, was added to the company’s board of directors and as a member of the audit committee in March 2022. He currently serves on the boards of Nestlé Nigeria Plc, Lafarge Africa Plc, Socfinaf SA, Okomu Oil Palm Company and PZ Cussons Nigeria PLC. On April 7, 2023, he also notified the board of his resignation from his position as a member of the company’s board of directors and as an independent member of the audit committee.
As a result of the resignations, the Company’s audit committee now has one member and is not in compliance with Nasdaq Listing Rule 5605(c)(2)(A) which requires the Company’s audit committee to be comprised of three independent directors.
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard
Hong Kong is rolling out the welcome mat for African tech startups looking to set up there. Thanks to InvestHK, the department of the Hong Kong Special Administrative Region (HKSAR) government responsible for foreign direct investment, setting up your headquarters in Hong Kong has never been easier. HKSAR has a presence in 33 markets and is actively pursuing relationships with African enterprises, including major banks, and metro development organizations.
Director-General of Investment Promotion at InvestHK, Stephen Phillips, notes that nearly 4,000 new businesses from around the world are now based in Hong Kong, a 52% increase from 2018. Many of these businesses are in the digital technology sector and have taken advantage of Hong Kong’s specialized incubators, business accelerators, and government funding schemes.
Through Startmeup.hk, InvestHK helps innovative and scalable start-ups set up or expand in Hong Kong. As Asia’s leading business destination and the gateway to Mainland China and Asia, Hong Kong is located within five hours of travel by two-thirds of the world’s population, making it the perfect entry point to the region. With growing interest among African businesses in the potential for expansion into the Asian market, InvestHK has opened representative offices in South Africa and Kenya.
InvestHK ‘s team during a visit to Kenya recently. Credits: InvestHK
Phillips points out that Hong Kong, with a local population of 7.5 million and 86 million from the Greater Bay Area, is a significant market for art, food, and consumer goods. It also presents significant opportunities for smart city and internet of things technology, electronics, and green technologies. “Hong Kong offers a route to growth markets in Asia, with their demographic dividends, high rate of tech adoption, and growing intra-Asian investment flows,” says Phillips. “Of course, there is also the economic beast — Mainland China — with opportunities to enter the market through JVs [joint ventures] and partnerships.”
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard
Swvl Holdings Corp (SWVL) (Nasdaq: SWVL), a global provider of transformative tech-enabled mass transit solutions, has reported that the Company received a letter (the “Letter”) from the Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company is currently not in compliance with Nasdaq Rule 5450(a)(1), as the Company’s closing bid price for its Class A ordinary shares (the “Ordinary Shares”) was below $1.00 per share for the last 30 consecutive business days.
The Company has 180 calendar days to return to compliance with the Nasdaq Stock Market Rules. The Letter states that the Company must resume compliance with the minimum bid price requirement by May 1, 2023. If at any time during this 180-day period the closing bid price of its Ordinary Shares is at least $1.00 for a minimum of ten consecutive business days, the Company will regain compliance; in that case, Nasdaq will issue a written confirmation of compliance to the Company, and the matter will be closed.
The Nasdaq staff will inform the Company that its Ordinary Shares may be delisted if it fails not demonstrate compliance by the end of the 180-day window ending May 1, 2023.
However, if the Company meets the continued listing requirement for the market value of its publicly held shares and all other initial listing standards for the Nasdaq Global Market, with the exception of the bid price requirement, it may then be eligible for additional time to regain compliance, of up to an additional 180 calendar days. The Company must additionally give additional written notification of its plan to correct the shortcoming during the second compliance period in order to be eligible.
SWVL says the Company’s top focus continues to be Swvl’s continuous listing on Nasdaq. The company plans to look into all available measures to correct the deficiency and return to compliance with the minimum bid requirement within the compliance period, including perhaps sanctioning a reverse share split, should the situation not improve over the aforementioned term.
The Company’s Ordinary Shares will continue to trade on the Nasdaq Global Market under the symbol “SWVL” for the duration of the aforementioned cure period, as may be extended, and the Letter from Nasdaq has no immediate impact on the Company’s Nasdaq listing or the trading of its Ordinary Shares on Nasdaq.
A Look At What SWVL Does
With intercity, intracity, B2B, and B2G transportation options available in more than 135 locations in more than 20 countries, Swvl is a leading global provider of innovative tech-enabled mass transit solutions. For those who cannot access or afford private services, the company’s network offers complementary semi-private transportation options in addition to public transportation. Swvl’s parallel mass transit systems enable people to travel whenever they want and anywhere they want, making mobility safer, more effective, and more accessible while also being more environmentally friendly. Customers can reserve their journeys using a user-friendly, proprietary app that offers a variety of payment methods and constant access to high-caliber private buses and vans.
Mostafa Kandil, who started his career at Rocket Internet and created the auto sales platform Carmudi in the Philippines, co-founded Swvl. In just six months, Carmudi grew to be the top car classifieds company in the Philippines. He then held the position of Head of Operations at Rocket Internet. Kandil joined Careem in 2016, the first unicorn in the Middle East and a ride-sharing firm. He encouraged the platform’s development in numerous additional markets.
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh
mybuxi has implemented a new On-Demand Transit service inside the city limits of Belp by making use of the technology provided by Swvl. mybuxi and Swvl’s activities in Switzerland provide assistance to over 50,000 residents, further establishing Swvl as the preeminent provider of intelligent mobility software in the area.
Switzerland’s Belp municipality is a rural Swiss hamlet that has picturesque vistas and a one-of-a-kind natural scenery that is preserved and safeguarded. In an area that is just 23.3 km2 in size, the community of Belp is home to 11,500 people. Despite its close vicinity to Bern, which is only 15 kilometres to the north, Belp suffers from substantial accessibility issues in urban public transportation. These challenges will always be an obstacle in the way of the development of a thriving ecosystem in the city. In this context, mybuxi, Switzerland’s leading mobility on-demand provider, took it upon itself to provide a more accessible, convenient, and reliable public transport by utilising Swvl’s technology. The company’s goal was to provide the convenience of ride-hailing at nearly the same cost as public transportation.
mybuxi has already successfully launched numerous On-Demand Transit businesses in Switzerland, one of which is Swvl, which transports more than 1,100 passengers per week in the regions of Herzogenbuchsee, Ostermundigen, Emmental, and Andermatt. Because of the excellent results obtained in the neighbouring Ostermundigen, the decision was made to link up various parts of the Belp municipality that are spread out across an area of 17.25 km2. The service was initiated by the launch of 81 “virtual stops,” which are very conveniently located near riders. One of these “virtual stops” is the train station, which serves as a first and last mile connection point to the Swiss train system with the neighbouring towns of Bern and Thun, with a travel time of approximately 15 minutes.
The service became live on August 20, 2022, and its hours of operation are as follows: 06:00 to 00:30 during the weekdays, and 06:00 to 1:30 on the weekends. Through the use of a mobile application that is white-labeled with the Swvl brand, passengers are able to reserve seats on mybuxi buses for either immediate or planned excursions. The fact that the vehicles are entirely electric demonstrates Swvl’s dedication to the local economy, as well as its commitment to a more sustainable and environmentally friendly environment.
The introduction of Swvl’s On-Demand Transit service in Belp exemplifies the disruptive potential of the company’s technology in the central European area. Today, the Swvl operation in Switzerland has provided transportation that is cleaner, greener, and more easily accessible to more than 100,000 passengers, serving a total of 100,000 journeys.
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexpert
Swvl, a global provider of transformative tech-enabled mass transit solutions, today announced that it has entered into a definitive agreement with a single U.S. institutional investor for the purchase and sale of 12,121,214 of its ordinary shares together with series A warrants and series B warrants (together, the “Securities”) at a combined purchase price of $1.65 per ordinary share, pursuant to a private placement, resulting in total gross proceeds at closing of approximately $20 million before deducting placement agent commissions and other estimated offering expenses.
The series A warrants may purchase up to 12,121,214 of the Company’s ordinary shares, and the series B warrants may purchase up to 6,060,607 of the Company’s ordinary shares. The series A warrants and series B warrants will each have an exercise price of $1.65 per share, will each be exercisable immediately upon issuance, and will expire five years from the date of issuance and two years from the date of issuance, respectively. If, during their respective five-year and two-year terms, all the warrants are exercised for cash, based on the exercise price of $1.65 per share, the Company will receive an additional $30 million in gross proceeds.
The closing of the private placement and sale of the Securities is expected to occur on or about August 12, 2022, subject to the satisfaction of customary closing conditions.
A.G.P./Alliance Global Partners is acting as the sole placement agent for the private placement.
The offer and sale of the foregoing Securities is being made in a transaction not involving a public offering, and the Securities have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or applicable state securities laws. Accordingly, the Securities may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and such applicable state securities laws. Under an agreement with the investor, the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) covering the resale of the shares of ordinary shares to be issued to the investor (including the shares of ordinary shares issuable upon the exercise of the warrants) no later than 20 days after the closing and to use commercially reasonable efforts to have the registration statement declared effective as promptly as practical thereafter, and in any event no later than 90 days in the event of a “review” by the SEC.
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh
Onlookers might have assumed that by the time Egyptian transport firm Swvl made it to Nasdaq via SPAC purchase, it would have become one of the African startup ecosystem’s few success stories. However, it appears that this is no longer the case. Swvl’s hopes of relying on the Nasdaq adventure are dwindling by the day: the company’s share price has plummeted from $9.33 to $1.64 in the four months after it announced its Nasdaq listing. As per its latest statement, Swvl has also cancelled one of the largest purchases by an African startup in recent years, the acquisition of UK-based competitor Zeelo for about $100 million. Swvl indicated in the statement to its stakeholders that all prerequisites for finalising the Zeelo sale had been completed, but the transaction could not proceed due to the present financial market turbulence.
Swvl’s Recent Notable Timelines
August, 2021: Swvl acquired Spain’s Shotl, and consequently entered Europe. Shotl was present (at the time of the acquisition) in 22 cities across 10 countries, including Brazil, Japan, and had a pan-European footprint, with over 350,000 bookings.
August, 2021: Swvl received $35.5m in PIPE (Private Investment In Public Equity) funding including from investors Agility and Chimera Abu Dhabi. Swvl’s proposed business merger with Queens Gambit Growth Capital (the SPAC acquisition) was the reason for the investment. The PIPE investment was made using Swvl’s exchangeable notes. Each note was exchanged for shares of the combined company at an exchange price of $8.50 per share.
November, 2021: Swvl announced its second acquisition, gobbling up ViaPool, a mass transit company in Latin America (Argentina). The deal was reportedly worth about $10 million.
February, 2022: Swvl received extra $21.5 million in PIPE funding. Again, each note was exchanged for shares of the combined company at an exchange price of $9.1 per share. Swvl pegged $8.50 per share for notes issued in 2021 and $9.1 per share for notes issued in 2022.
March, 2022: Swvl announced its third acquisition, of door2door, a German-based high-growth mobility platform that partners with municipalities, public transit operators, corporations, and automotive companies, providing software for on-demand mobility, multimodal routing and mobility analytics. door2door has 24% market share in Germany, which is Europe’s largest mass transit market. The value of the deal was not disclosed.
March 31, 2022: Swvl went public (through a SPAC merger with Queen’s Gambit Growth Capital). As a result of this, Swvl Holdings Corp. Class A common stock and warrants of Swvl Holdings Corp. began trading on NASDAQ under the ticker codes “GMBT” and “GMBTW.” Shares were sold at $9.33 per share on the first day. An aggregate of 35% of Swvl’s total ownership became public tradable.
April, 2022: Swvl announced the acquisition of Volt Lines, a Turkey-based B2B and mobility-as-a-service company. The acquisition was made one month after Swvl’s public listing. Swvl stock was down 12% in pre-market trading at this time. The value of the deal was not disclosed.
April, 2022: Swvl announced the purchase of Zeelo, the UK’s largest smart bus platform and technology scale-up by bookings, for US$100 million. The transaction was scheduled to close in May 2022.
May, 2022: Swvl announced it has laid off 32% of its entire workforce. The lay offs affected staff in the startup’s engineering, product, and support divisions. Swvl it expected to be cash-flow positive in 2023 as a result of the downsizing.
June, 2022: Swvl the suspension of its daily and city-to-city services in Kenya and its daily services in Pakistan. In a statement, Swvl noted that the suspension was “in light of the worldwide economic slump.”
July, 2022: Swvl announced the acquisition of its Mexico-based Urbvan Mobility Ltd (“Urbvan”), a shared mobility platform that provides tech-enabled transportation services to Latin America’s second biggest country by population. Formed in 2016, Urbvan is present in 18 cities around Mexico. The value of the deal was not disclosed. According to Swvl, the deal will be completed in Q3 2022.
July, 2022: Swvl terminated their previously-announced $100m transaction whereby Swvl would acquire Zeelo. Swvl previously funded a $5M convertible promissory note to Zeelo. Following the termination of the acquisition transaction, Swvl and Zeelo mutually agreed to terminate the convertible promissory note and Swvl forgave the $5M balance under the transaction.
August, 2022: Swvl announces first major partnership outside of acquisition with the Kuwait-based City Group, a premier transport operator and provider of warehouse services in Kuwait, under which City Group will use Swvl’s Software as a Service (“SaaS”) products.
A Woeful SPAC Outing
According to Swvl’s Form 424B3 filed on July 7, 2022, it is clear that the five-year-old startup is not only dealing with the current volatility in the financial markets, but it also appears to be dealing with the uncertain confidence of its SPAC investors, who appear to be willing to hang on even longer without redeeming their shares in the company. According to lock-up extension agreements signed between Swvl and the concerned investors, who own 84 percent of the shares currently trading on Nasdaq, they would be required to hold on for extra periods ranging from one year to eighteen months after the prior lock-up periods expired.
The lock-up agreements, together with other alternative financing agreements, provide a mechanism to avoid the existing high redemption rates among SPAC investors. SPAC redemptions were on the upswing for 2021. From January through July, the average monthly SPAC redemption rate ranged from 7% to 43%, according to SPAC Research/SPAC Alpha. From July to November, however, this range expanded to 43 percent -67 percent, with the average SPAC having a redemption rate of 60 percent across these four months.
The purpose of redemption rights under a conventional SPAC arrangement is to assist motivate investors by giving them a sort of “money-back guarantee” that entitles them to return their shares for the initial IPO price, which is normally a modest $10 per share. However, if a considerable proportion of shareholders choose to exercise their right to redemption, as has recently happened with several SPACs, the combined SPAC business’s capital available for future operations may be significantly reduced. This will almost certainly expose the SPAC to the risk of failure if it occurs. A common scenario that triggers this right of redemption is when the share trades below its listing price. Swvl’s stock price has since fallen from $9.33 to $1.64. The table below depicts these difficulties among recently-listed SPAC companies.
S/N
NAME OF SPAC COMPANY
INDUSTRY
SPAC MERGER COMPLETION DATE
STOCK MARKET
PRICE PER SHARE ON FIRST DAY OF PUBLIC TRADING (IN USD )
CURRENT PRICE PER SHARE AS AT AUGUST 3, 2022 (IN USD)
Lessons African Startups Can Draw From Swvl’s SPAC Outing
Speedy Execution Is Key But Regulations Remain King
Swvl’s co-founders’ ability to execute quickly has never been questioned. Indeed, one of its early backers, Vostok New Ventures (now VNV Global), stated succinctly in 2019 that “The entrepreneur in this case is of exceptional calibre. Mostafa Kandil, previously of Rocket and Careem, has established a team that executes well and quickly. Indeed, Mostafa could be the first Arab tech entrepreneur to build a global product.” This quick execution skill ensured that the founders were able to expand the startup globally and take it public within a record period of just 5 years.
However, swift execution frequently entails dangers, notable among them being those related to regulation. SPAC was formerly only weakly regulated by the Securities and Exchange Commission (SEC), which is in charge of overseeing securities and investments in the US. SPAC financial statements were fairly brief and could be created in a matter of weeks in the IPO registration statement (compared to months for an operating business). There were no past financial results or assets to reveal, and the company risk indicators were modest. The IPO registration statement was basically standard language with director and officer biographies thrown in for good measure.
The following primary modifications for SPACs would now be required by the proposed rules: a) in certain SEC filings by SPACs, new disclosure and financial statement requirements, especially in relation to financial projections and fairness evaluations in de-SPAC transactions; b) the removal of the safe harbour for forward-looking statements under the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) for disclosure in those registration statements; c) new registration requirements under the Securities Act of 1933, as amended (the “Securities Act”), for de-SPAC transactions; Securities Act liability for “underwriters” in de-SPAC transactions; and a 20-calendar-day minimum dissemination period for disclosure documents in a de-SPAC.
Perhaps the SEC’s most significant disclosure rule is the one which provides that SPAC sponsors must now inform SPAC shareholders that their incentives are to close any deal, and that shareholders who continue to hold SPAC shares through the deSPAC will have their holdings diluted by at least 20%, and frequently substantially more.
Due to this increased attention from regulatory organisations like such as the SEC and the Financial Industry Regulatory Authority (FINRA) in recent months, SPAC acquisitions are now intrinsically riskier. Numerous high-profile SPACs have recently been the subject of federal investigations, which has probably put many ordinary investors on the defensive.
Therefore, startup owners should push for speedy execution while simultaneously keeping an eye out for any regulatory ambushes and preparing a response in advance. There is no point in denying that the string of SEC regulations that were enacted after Swvl’s SPAC went public undoubtedly caught the company off guard. This is clearly evident in its recent operational decisions.
Increasing A Startup’s Burn Rate Due To High Compliance Costs May Be Costlier In The Long Run, Especially For Startups Without Any Future Funding Clarity
In any case, every startup’s ultimate goal is to exit as soon as possible, but doing so need not be costlier, especially if the startup is not yet mature enough to handle certain costly operations.
Swvl had raised $122 million in total funding as of February 2022. It then paid more than $10 million in fees for its SPAC IPO. While acknowledging that it may incur significant expenses and devote significant management effort to ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act, which will increase further when it is no longer an “emerging growth company” as defined under the US Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), Swvl suggests that it may have to delist from Nasdaq in the future if it becomes increasingly unprofitable to continue to list.
The higher compliance costs, as well as the company’s dismal performance on Nasdaq, explain why it has recently had to curtail its operations. It is still unclear whether the company would avoid more downsizing in the future.
Startup’s Management Should Implement Standard Corporate Governance Practices And Undergo Relevant Training Early Enough
One important takeaway from Swvl’s SPAC adventure is the importance of early exposure to sound corporate governance principles. This will get the startup’s management ready for the challenges of following and putting into practise the accepted corporate governance standards.
Swvl acknowledged that its management team has limited expertise to handle a publicly traded firm, deal with investors in public companies, and adhere to the ever-more-complex legislation governing public corporations.
“Swvl’s management team may not successfully or efficiently manage their new roles and responsibilities or the transition to being a public company subject to significant regulatory oversight and reporting obligations under U.S. federal securities laws and the continuous scrutiny of analysts and investors. These new obligations and constituents will require significant attention from Swvl’s senior management and could divert their attention from the day-to-day management of Swvl’s business, which could adversely affect Swvl’s business, financial condition and operating results,” the recent disclosure from the company reads.
Startups should therefore prepare themselves from the beginning for the challenges of building a global company as well as the regulatory and corporate governance practices they will face during the growth stage of their business.
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh
(“Swvl” or the “Company”), a global provider of transformative tech-enabled mass transit solutions, today announced a definitive agreement to acquire door2door, a European high-growth mobility platform that partners with municipalities, public transit operators, corporations, and automotive companies, providing software for on-demand mobility, multimodal routing and mobility analytics. The closing of the door2door transaction is subject to customary closing conditions and is expected to be completed in Q2 2022.
Mostafa Kandil, Egyptian CEO and founder of Swvl
Founded in 2012 with the mission of making cities smarter, door2door has developed a leading proprietary MaaS software platform that can be easily integrated into any existing transit network. door2door has a strong commercial track record with 70 deployments across 10 European countries and approximately 24% market share in Germany, Europe’s largest mass transit market. Swvl and door2door share a commitment to expanding access to affordable transportation and unlocking economic, social, and environmental benefits for riders and their communities.
Mostafa Kandil, Swvl Founder and CEO, said, “Swvl and door2door share an ongoing commitment to disrupting traditional public transportation systems with tech-enabled mobility solutions focused on accessibility, convenience and sustainability. door2door’s impressive foothold in Europe, and particularly DACH2, complement Swvl’s recent growth efforts, including our acquisitions of controlling interests in Shotl and Viapool, which launched the Swvl platform in Europe and Latin America, respectively. By significantly expanding our European footprint and furthering our MaaS and SaaS capabilities, we continue to deliver on our growth objectives, while effectively scaling the Swvl platform to key additional geographies.”
Transaction Highlights:
The transaction with door2door will create a leading global mass transit player, with synergies on offerings, geography, partnerships and product domain:
Boosts Swvl’s momentum of growth and expansion in Europe and beyond by bringing the Company’s total geographic presence to more than 20 countries on 4 continents.
Leverages door2door’s impressive growth track record, with 45% CAGR in number of customers from 2018–2021, >90% customer retention and 7.5x revenue growth from 2017–2021.
Provides compelling market opportunities with access to more than 100 additional European cities.
Provides a launch pad when combined with Shotl to tap into the $22.5 billion SaaS/TaaS market in Europe, where door2door brings a deep understanding of market dynamics.
Unlocks the full potential of SaaS for Swvl through door2door’s proprietary mobility orchestration platform with fleet operations management, insights and reporting, and a driver, passenger and attendant application combined with strong technology in the form of a white-label engine, API integration and free floating options.
Allows Swvl to integrate door2door’s scalable technology stack with Swvl’s proprietary technology to predict and identify latent demand, create routes around demand clusters, create dynamic routes and cost efficient plans, price supply through bidding, and enhance dynamic pricing capabilities.
Enables partnerships with municipalities, public transit operators, corporations, non-emergency medical transportation and smart city organizations, and automotive companies.
Offers a complementary suite of mobility solutions including EV/AV fleet management, on-demand and fixed route public transit, corporate and campus shuttles, autonomous logistics delivery and demand management to add to Swvl’s existing suite.
Advances Swvl’s ESG strategy by accelerating its adoption of EV/AV technology and creating partnership opportunities to digitize non-emergency medical transport.
Maintains an outstanding policy network on both a national and EU level, providing additional opportunities to enter new markets and expand Swvl’s B2G business.
Dr. Tom Kirschbaum, door2door Co-CEO, said, “We are excited to embark on this next phase of growth alongside the Swvl team. We have been impressed by Swvl’s ability to rapidly scale its business while continuing to provide best-in-class, transformative mobility solutions for customers. Now we are looking forward to leveraging the combined capabilities of our platforms to alleviate many of the burdens and inefficiencies posed by traditional commuting methods.”
Maxim Nohroudi, door2door Co-CEO, said, “With Swvl and door2door joining forces today we are building a global mass transit company. Swvl’s outstanding TaaS experience adds value to our European customers, while door2door complements Swvl with MaaS solutions and B2G capabilities. Together, we are catering to diverse mass transit challenges worldwide, providing a truly global mobility platform. “
Youssef Salem, Swvl CFO, said, “The acquisition of door2door provides us with a leading position in Central Europe, attractive SaaS revenue base and pipeline, complementary suite of new mobility products, strong hub in Berlin and a launch pad for further European and global expansion across marketplace and SaaS offerings. Following our recent acquisitions of controlling interests in Shotl and Viapool, investments in mass transit platforms in the United Kingdom and Mexico and launches across Latin America and Europe, this transaction further demonstrates our ability to utilize our growth capital and public currency to pursue accretive organic and inorganic strategic initiatives. We look forward to capitalizing on the numerous opportunities provided by this transaction and furthering partnerships to advance our leading market position as a provider of technology-enabled mass transit solutions on a global scale. We are confident that the Swvl platform will have a very positive and sustained impact on European transit.”
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
Swvl, an Egyptian ride-hailing startup, will merge with US SPAC Queen’s Gambit Growth Capital to offer 35 percent of its shares on the Nasdaq stock exchange.
According to CEO Mostafa Kandil, the Initial Public Offering would take place by the end of January 2022.
Swvl Holdings Corp. plans to expand into the Latin American and European markets in the coming year, Kandil added, by supplying governments with the most up-to-date smart transportation solutions.
Mostafa Kandil, Swvl’s co-founder and CEO
A Look At What SWVL Does
Swvl, which was founded in 2017 by Mostafa Kandil, Mahmoud Nouh, and Ahmed Sabbah, began as a bus-hailing service in Egypt, allowing users to travel inside a city by booking seats on fixed-route buses. Later, the service was expanded to Kenya and Pakistan, and the company’s headquarters were relocated to Dubai. In several markets, the company now offers intercity travel, car-based ride-sharing, and corporate services. Swvl produced $26 million in annual gross revenue, according to its SPAC presentation, with a negative EBITDA of $29 million (which means the company lost $29 million). It stated that by 2025, it hopes to increase its yearly gross revenue to $1 billion.
Swvl services both consumers and businesses in its major countries of Egypt, Kenya, and Pakistan through Daily, Travel, and Business solutions, however it solely serves businesses in some of the new regions it has just entered, such as Jordan and Saudi Arabia. Swvl’s transportation-as-a-service business offering allows schools, universities, and corporations to create customized transportation alternatives for their students or employees using Swvl’s software and fleet. In the next five years, the company wants to be in 20 countries on five continents.
The Cairo-based business has raised over $100 million to date, including an unannounced fundraising round earlier this year. Vostok New Ventures Global, Beco Capital, Raed Ventures, Sawari Ventures, MSA Capital, Silicon Badia, and Oman Technology Fund are among its prior investors. Its most recent public investment round was a $42 million Series B-2 round in 2019, following which it surreptitiously raised another $20 million in early 2020.
Mostafa had previously worked as a market launcher for the Middle East’s largest ride-hailing company. Swvl co-founders Mahmoud Nouh (COO) and Ahmed Sabbah (CTO) both departed the company to start their own businesses in October 2019 and March 2021, respectively.
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
