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| Hey Insiders, Today we are bringing you an extra analysis of VinFast's upcoming SPAC merger and Illumen's $168M impact fund. Scroll down for some quick hits, then let us know if you'd like to see more in future issues!
Karan
p/karan-chafekar | |
| 1 | | Vietnamese EV automaker VinFast announced plans to go public in the U.S. via a SPAC merger with Hong Kong-based blank check entity Black Spade Acquisition Co. In December 2022, VinFast filed for a regular U.S. IPO. News of the SPAC deal highlights a change of plans, likely due to the frozen IPO market at the moment. The deal is set to give the merged entity a valuation of $27B, including debt. However, there are concerns over its "purported" valuation, given that the firm has failed to disclose how it arrived at the reported figure. Additionally, the firm has not lined up any institutional investors to invest alongside the SPAC deal through a private investment in public equity (PIPE) transaction. VinFast's SPAC deal attempts to revive the SPAC listing asset class; however, the deal "feels more like an act of desperation than a revival," per Bloomberg. VinFast's equity value of $23B is double the market capitalization of EV startups Lucid Group and Rivan. Yet, given the poor public market performance of its peers, Polestar and Lucid Motors, there are concerns about VinFast's post-merger stock market performance. 
Post-merger SPAC performance has been volatile, with several EV manufacturers witnessing steep declines in valuations. Valuations of Nikola Corp., Lordstown Motors Corp., and Canoo Inc. have seen steep declines, resulting in massive writedowns for shareholders. Electric Last Mile Solutions Inc. filed for bankruptcy a year ago. Valuations are speculative and can change depending on prevailing market conditions. Valuation of MSP Recovery's SPAC merger with Lionheart Acquisition Corp. II slumped 96% since its public market debut. The firm was valued at $33B at its listing. Vietnamese billionaire Pham Nhat Vuong founded VinFast in 2017. Vuong has since invested $8B into the firm. The organization initially produced cars with internal combustion engines before pivoting to EVs. It recently started exporting vehicles to North America, although it has had a rocky start and had to delay its initial deliveries. VinFast is building a factory in North Carolina, which is expected to open in 2025. The firm intends to take advantage of subsidies under the Inflation Reduction Act. In April 2023, Vuong and Vingroup committed $2.5B to VinFast "to accelerate development so that it can quickly achieve its growth goals on a global scale." 
Losses have mounted at the firm, with the firm losing $2.1B last year alone, widening its cumulative losses to date to $5.4B. The firm expects cumulative capital expenditures of $3B over the next two years. VinFast's existing shareholders are set to purchase 99% of the shares, per Bloomberg. With such a small portion of shares available to the public, Bloomberg estimates the share prices to remain volatile. Black Spade, a blank check firm backed by casino operator Melco's chairman and CEO Lawrence Ho, raised $169M from sponsors in 2021. |     | |
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| 2 | | Illumen Capital secured $168M in capital commitments toward its second fund of funds. More than 100 investors backed the fund, including Ford and WK Kellogg foundations. Illumen's impact fund aims to increase racial and gender diversity in startup investments done by other VC and PE funds. Illumen's new fund comes amidst a rising need to increase access to VC funds for fund managers from diverse backgrounds. In 2019, Illumen conducted joint research with Stanford University to uncover biases in investments and corporate operations of fund managers. The study evaluated 180 fund managers and collected feedback about the VCs from respondents. The researchers discovered evidence of racial prejudice in their investing decisions. 
Global investors are showing greater responsibility toward increasing diversity, causing a steady increase in capital allocation toward impact funds. Per Pitchbook, total assets under management (AUM) under global impact funds reached a record high of $322.2B in 2022. Impact AUM has steadily increased since 2007. Impact funds raised funds worth $54.1B from the start of 2022 until the end of September, per Pitchbook, of which VC funds and fund-of-funds accounted for $5.2B and $150M, respectively. Cumulative fund value increased in 2022 despite a drop in fund count. The funding does not reflect the true picture, as many general partners choose not to categorize their funds as impact funds, as it may suggest to potential limited partners that financial returns are a secondary objective. Despite the increase in funding for impact funds, VC capital deployment into Black-founded startups halved from $5.1B in 2021 to $2.3B in 2022. The disparity suggests that the overall VC funding pullback "disproportionately" impacted Black-founders, per Crunchbase. Startups led by Black-founders secured 1.1% of the total VC capital in 2022, declining from 1.5% allocated in the previous year. Funding slumped to $183M in Q3 2022, the lowest quarterly total since Q3 2020, before recovering slightly to $274M in the following quarter. Investors tend to prefer infrastructure-focused impact funds. Three infrastructure-focused funds launched by Brookfield Asset Management, Ullico Investment Advisors, and Copenhagen Infrastructure Partners accounted for 40% of the total funds. The trio raised funds worth $22B. Illumen Capital uses an evidence-based approach to analyze fund performance and helps fund managers optimize the effectiveness of their impact. Additionally, Illumen Capital assists fund managers in implementing strategies to decrease racial and gender prejudice in recruiting, investing, and corporate operations. Illumen's second fund was oversubscribed and surpassed its initial target by $50M. The second fund's size was nearly double that of its predecessor, which raised $88M from LPs. The fund invests in VC, PE, and growth funds focused on education, health and wellness, climate and sustainability, and financial inclusion. "Each of these areas represents massive markets that are undergoing increasing disruption and volatility. We know from our research that this increase in volatility and disruption leads to many retreating to their biases," said Dodson. | | | |
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 | Analyst | | Karan Chafekar is a Management Consultant, Business enthusiast, and Licensed Pilot. | | This newsletter was edited by Aaron Crutchfield | |
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