I attended a charity dinner for a Nepalese orphanage recently. The black-tie event was arranged by a generous fund manager. Over $150,000 were raised, which went a long way. The funds were to be used for the education of the children.
An irony was missed by the investors in attendance. There are orphans of a different kind staring them in the faces. These kids are not in need of charity. Instead, they could do with some investment.
The spac (special purpose acquisition company) boom that started in 2021 has created an odd situation. Almost 300 companies have de-spac-ed. More than half of them are trading below the book value of the equity. Trading below the book value could be a sign that the company is cheap.
Almost one-fourth of them are trading below their net cash. This means that the value of the company is less than the cash (minus the debt) on the balance sheet.
The curiosity is greater among companies with operations in Singapore. Singapore is a prosperous city-state with a support system for orphans.
However, the Singapore spacs listed on Nasdaq are a forgotten lot. The operations are in the tropics, but the listing is on the other side of the globe.
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Singapore’s investors do not give these US-listed names enough attention. American investors have little familiarity with these faraway names.
Triterras is a commodity trader that uses blockchain. In 2020, it was the first Singaporean company to list on Nasdaq through a spac with NetFin.
Triterras had a blockchain solution for commodity trading. It would improve transparency in a field where it was lacking. Blockchain would check inventory in trade financing. For instance, the US$10 billion Greensill collapse was due to the same cargo being pledged to multiple banks. Six banks were holding the same consignment as collateral.
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Spacs are supposed to have an arms’ length relationship with their target companies. They should be like strangers who meet in a bar.
In 2021, a short-seller alleged that Triterras and NetFin were anything but strangers. Triterras founder Srinivas Konneru and NetFin’s CEO Rick Maurer had allegedly been partners for years.
The short-seller also claimed that two-thirds of the Triterras trades between June 2019 and August 2020 were handled by related parties. Triterras rejected these allegations.
The upshot of this controversy is that Triterras is trading at a 99% discount to its value during the de-spac. Its net cash is US$65 million ($86.9 million), which is 33 times its market capitalisation. If the company paid a special payout of just 10% of the net cash, it would be three times the market cap.
The company’s discount seems odd. The controversy about the related party transactions is old news. It generated US$33 million of net profit in FY2022, which means that it is trading at 0.1x FY2022 P/E. Value investors should do some digging.
MoneyHero Group is the latest unloved Singapore spac. The net IPO proceeds was US$100 million. It is trading at just 1.4 times the net cash.
The financial products platforms listed last month. The company is a radical in fintech aspirations. Its platform compares personal loans, insurance and credit cards. It is like an online guide to personal finance.
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MoneyHero gets a fee each time a customer buys a product. The company has almost 10 million users with an average revenue per user or ARPU of US$7. Its revenue has risen 45% over the last five years.
The company generated US$6 million in ebidta losses in 1HFY2023. It could become ebitda-positive in FY2023.
MoneyHero’s pedigree has attracted attention, except that of investors. In the three days since its listing, MoneyHero is down 64%. The stock tanked as soon as the post-listing parties started.
Its cash burn may have been US$15 million in FY2022. If that rate continues, the net cash balance could fund the company for another five years.
The biggest orphan could be a company that we use daily. Grab Holdings, the largest spac in history, is trading at a 80% discount to its peak. It now has US$3.8 billion, which is a third of its market cap. It is on the cusp of ebitda positivity, according to the market. It has got rid of incentives. The market expects it to generate US$396 million in free cash flow in FY2025. This means that it could start paying out its cash balance before long.
There are unloved companies on the Nasdaq that deserve attention. If so, investors may have more to give to charity.
Nirgunan Tiruchelvam is head of consumer and internet at Aletheia Capital and author of Investing in the Covid Era. He does not hold any position in the stocks mentioned in this column. This column does not constitute investment advice of any kind
