TLDR:
Chijet, a China-based EV maker, saw their stock plummet from $10 to $3.80, highlighting the uncertainty and risk of SPACs. The rise of titans in the Chinese EV market combined with SPACs targeting companies that cannot or will not go through the traditional IPO process has raised questions about the true worth of these ventures.
Ladies and gentlemen, gather ’round for the thrilling tale of Chijet, the China-based electric vehicle maker that recently made its grand entrance on the NASDAQ through a daring SPAC merger with Jupiter Wellness. But alas, the stock has since plummeted from its standard SPAC price of $10 to a mere $3.80. Not the happy ending investors were hoping for, but a perfect illustration of the intrigue and mystery surrounding the world of SPACs.
The plot thickens as we examine the setting: China’s electric vehicle market, a land under siege by its own challenges, with major players like NIO struggling to maintain sales. The question remains – is the entire Chinese EV market slowing down, or are smaller players being overshadowed by the rise of titans in the industry?
Enter the enigmatic world of SPACs, the modern-day shell companies armed with piles of cash and lofty ambitions. Investors eagerly buy shares at $10 each, with the goal of merging the SPAC with a private company, thus bringing the latter to market and bypassing the tedious process of initial public offerings (IPOs) and their hefty 7% organizing bank fees. This wild SPAC ride also enables companies that may be too young to survive the IPO process to enter the market.
But beware, dear reader: Those who signed up for $10 have the option to jump ship during the actual merger, leaving behind less cash and the usual reason stocks fall after SPACs. The details of this plot twist are often revealed only days later, adding to the suspense.
The existence of SPACs depends on the presence of investable companies that simply cannot or will not go through the traditional IPO process. However, if these SPAC ventures perform worse in the market than their regular counterparts, the investment scenario grows increasingly unattractive.
And here we find our protagonist, Chijet, whose journey has been far from smooth. Originally, the plan was for Chijet to merge with the Deep Medicine SPAC at a valuation of $2.55 billion, but the deal fell through. This second attempt with Jupiter raises questions about the company’s true worth. One must also wonder if the SPACs originally targeting healthcare mergers jumping into the automobile sector signifies a shortage of worthy targets in healthcare.
While there is no doubt that some SPAC mergers prove to be successful, it’s hard to ignore the froth bubbling in the pipeline. It seems rather unlikely that there’s a hidden trove of companies that should be on public markets but aren’t, and Chijet’s performance thus far serves as a cautionary reminder.
In conclusion, the world of SPACs and the EV market is fraught with drama, uncertainty, and the occasional plot twist. Whether or not Chijet can overcome its challenges and become a shining star in the market remains to be seen. But one thing’s for sure: with large sums of cash, shell companies, and a volatile market, the stage is set for an epic tale of business intrigue. Grab your popcorn, folks – this story is far from over.
