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SWVL Holdings Corp, the Cairo-born global tech startup led by Egyptian entrepreneur Mostafa Kandil, has lost its unicorn status after a tumultuous one-year period in which its share price has plummeted, causing its market capitalization to drop by more than $1.36 billion.
The rapid expansion of the company culminating in its Nasdaq debut in April 2022 has recently given way to austerity measures due to worsening economic uncertainty and tightening financial conditions, resulting in a decline in the company’s shares.
This has been further exacerbated by mounting operating costs and listing costs, resulting in widening losses and a diminished valuation. This follows its listing in 2022 when it achieved unicorn status and became the first African firm to list on Nasdaq through a special purpose acquisition company (SPAC).
SWVL’s $1.36 billion crash results in multi-million dollar losses for investors
SWVL is a globally recognized provider of tech-enabled mass transit solutions that operates in over 135 cities across 20 countries. Its offerings include intercity, intracity, B2B, and B2G transportation. It was co-founded in 2017 by Egyptian entrepreneurs Mostafa Kandil and Ahmed Sabbah, with the mission of alleviating traffic congestion in Cairo, Egypt’s capital city.
Despite its impressive track record, SWVL’s market capitalization has experienced a significant decline of over $1.36 billion since April 2022, declining from $1.37 billion to $6.68 million. This has led to substantial losses for investors, including Mostafa Kandil, who owns a 6.35-percent stake in the company.
SWVL’s growth hampered by financial setbacks and Nasdaq listing costs
Under Kandil’s leadership, SWVL has achieved impressive growth in both gross revenue and market share, with more than 1.4 million riders booking more than 46 million rides on its platform, which is powered by a vast network of thousands of drivers.
Despite experiencing a 215-percent increase in revenues to $40.7 million in the first half of its 2022 fiscal year, SWVL faced numerous challenges in the first six months of the year, with losses doubling year-over-year to $161.6 million due to rising expenses related to its SPAC merger and Nasdaq listing in April 2022.
Risk of delisting on Nasdaq looms as SWVL’s market cap drops below $10 million
Earlier this year, it received written notice from Nasdaq indicating that it was not in compliance with its listing rule, which requires companies listed on the Nasdaq Global Market to maintain a minimum market value of listed securities of $50 million.
In an effort to boost its valuation and combat its losses, SWVL has implemented stringent measures, including a 50-percent reduction in headcount, pay cuts for executives, and the elimination of unprofitable routes in Egypt, Jordan, and Kenya.
Youssef Salem, SWVL CFO, expressed confidence that the company’s cost-saving measures will enable it to achieve cashflow-positive status in the coming year despite ongoing market challenges. “With 58 percent of our portfolio turning adjusted EBITDA neutral or positive, we believe that we are on track to turn cashflow positive in 2023,” Salem said.
