How much higher can IPOs go?⛰️

The answer lies in Deliveroo, Bilibili, and SPACs

This is edition 255 of Beyond The First Order, a premium daily newsletter that demystifies the hidden models, incentives and consequences of the most significant events across India and Southeast Asia

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Good morning,

For Nike, the devil lies in the details of its shoes. For their vaccine fix, South Asian countries are caught between India’s vaccine export halt and a price war. RBI’s deadline largesse just deprived UPI of a greater share of India’s recurring transactions. You know those stories of IPO pops and how company X had a stellar listing? Well, there is a slight change to that story. 

Are we past the peak?

The IPO peak that is. 

Deliveroo, the UK-headquartered food delivery giant that operates across Europe, Middle-East, Southeast Asia, Australia and New Zealand, had a terrible, horrible, no good, very bad day.

Its shares tumbled 30% on the very first day, after Deliveroo had already priced them at the lower end of its valuation scale. FT reported that it was the worst opening-day fall in over 10 years for any IPO that had raised at least $1 billion.

One equity capital markets banker, who was not involved in the deal, said he was left stunned by what he called an “absolute car crash”.
“It’s completely embarrassing. I can’t remember a time this has happened before,” he said. The IPO was “disastrous” for London’s hopes to become a focus for tech listings, he added.

Does this mean Deliveroo was a bad IPO? Or that investors are finally getting tired of rewarding deeply loss-making companies with giant valuations?

Across the Atlantic, Deliveroo’s peer Doordash is still killing it.

On the other side of the world, another IPO disappointed investors. Bilibili, or “China’s YouTube”, fell 6.8% on its opening day in Hong Kong. 

Bilibili shares have lost 38% since Feb. 11 on the Nasdaq as investors fled tech-sector stocks after long-term interest rates rose, denting the future valuation prospects of tech companies.
Bilibili priced its Hong Kong offering at a 2.7% discount to the stock's last close on the Nasdaq last week, giving it a valuation of $39.4 billion. The pricing compared to maximum guidance of HK$988 for retail investors.
However, the Shanghai-based company's shares have dropped a further 7% on the Nasdaq since the price was set in Hong Kong.

However, the Shanghai-based company’s shares have dropped a further 7% on the Nasdaq since the price was set in Hong Kong.

In SPAC territory, there’s already a crash underway.

It may turn out that five new special purpose acquisition companies per day was too many.
SPAC mania is showing signs of hitting a stock-market saturation point, with an index tracking blank-check flyers suddenly down about 20% from its peak. The craze is being clipped as quickly as it whipped up, with sentiment souring on growth stocks amid a runup in interest rates and rotation into beaten-down names. Before the selloff, SPACs had almost doubled since October.

Yeah, looks like we’re past the peak.

BillDesk: 10 UPI: 1

On 1 April, the RBI had mandated that no merchant could store card details. So all digital merchants collectively held their breath, waiting for their recurring transactions to fail. Then, the banking regulator showed the power of its pen.

In a passive aggressive note yesterday, the regulator noted that even after extending the deadline once (From December 2020 to April 2021), the framework has not been implemented by certain banks. So to prevent widespread failure, it gave banks a six-month period for compliance. It then added that it had taken notice of this non-compliance and will deal with it separately. Shudder

Merchants probably let out a sigh of relief at first. And then most likely rushed to payment infrastructure providers such as BillDesk, which has readymade tech called a Standing Instruction Hub that can be integrated by banks. And given the long standing relationship the 20-year-old company enjoys with banks, BillDesk is expected to strike gold. 

This is a lost opportunity for Unified Payments Interface (UPI). In its guidelines the RBI had said that merchants could still process recurring payments via UPI. So if this extension had not happened, merchants would have at least experimented with recurring payments over UPI. But now that they have more time on their hands, solutions like Standing Instruction Hub—which process both cards and UPI—will likely find more takers. 

UPI may have just narrowly missed its chance of grabbing a bigger chunk of the Rs 2,000 crore ($273.4 million) a month worth of recurring transactions that happens on cards. 

With vaccines, one man’s gain is another’s loss

An acquaintance was returning to India from London a few days ago. But the English authorities would not let her board a flight until she tested negative for Covid at the Heathrow airport. 

Caveat: She had to undertake a “fit to fly” test at a private paid facility. UK’s National Health Services wasn’t providing the test for free or at subsidised rate. She ended up taking her test at one of the Boots facilities (a pharmacy chain) and paid $200 (close to Rs 15,000). When she landed in Delhi, she had to again undertake a Covid test before exiting the airport. However, that cost her just Rs 800, barely a twentieth of what she had paid a few hours ago. 

This massive disparity in testing prices and policies across the globe hits those that travel the most. But access to vaccines—which paves the way for better international mobility—is likely to get trickier in South Asia. Historically, India has had a reputation for both having cost-effective public health systems and being a friendly neighbor when it comes to providing health aid. But as far as supplying vaccines goes, it is not doing so well. 

The government of India is now holding back nearly all of the 2.4 million doses that the Serum Institute of India, the private company that is one of the world’s largest producers of the AstraZeneca vaccine, makes each day.

With a massive—and urgent—need of vaccines for its citizens, India is now seemingly withholding doses that it had earlier pledged to neighbouring countries such as Pakistan. Amongst other issues, India holding up supplies is making our South Asian neighbours anxious. 

With a resurgence of Covid cases across the globe, Covax—the global effort for getting vaccines to poorer nations—has found itself in a mess. And while it says it expects to ship 237 million doses of the AstraZeneca vaccine by end of May, India has put the brakes on that exercise, at least for now. 

In the midst of this push and pull, I spoke to two journalists across the subcontinent, one in Pakistan and another in Sri Lanka. “I am wondering how Covax is operating. How are pledges being made (to poorer countries including Pakistan) and then are they being guaranteed, despite a very obvious and logical strain on vaccine producing countries?,” the Pakistani journo asked. “Same for us too. And we were told it’s because India needs to vaccinate its population first,” quipped the Sri Lankan counterpart. 

As a result, countries such as Pakistan—which relied too heavily on aid for vaccines and effectively let their procurement strategy take a back seat—are now facing the heat. In Sri Lanka, the person quoted above said that the situation was no different and that there could be delays in meting out second doses to those who have already received their first jab, considering the looming uncertainties around supply from India. This, even as Sri Lanka assured its citizens that the second doses will be rolled out effective 12 April. 

Another vaccine of interest—Sputnik from Russia—is becoming a bone of contention too. If it receives Indian approvals, Dr Reddys, the official importer and distributor of Sputnik in India, is expected to take load off Serum Institute of India and Bharat Biotech in terms of meeting domestic needs. 

Meanwhile, Pakistan is having its own issues with Sputnik. Around 50,000 doses of the Russian vaccine are lying in cold storage, as the government and importers bicker over a price cap in private clinics and hospitals. Importers are threatening to withdraw the supplied doses if the Pakistani government doesn’t increase the maximum retail price from Rs 8,449 ($116) for two doses. And that is still 10X higher than the Indian price caps on vaccination in the private sector.

Caught between Sputnik price wars and India’s halt on vaccine supplies, South Asia’s vaccine strategy now hangs in balance.

Nike says, Just don’t do it

So, get this.

A company that sells quirky products decides to customise Nike sneakers by adding a drop of human blood mixed with ink to the sole. It called them “Satan Shoes”. It (obviously) manufactured only 666 of them. It then collaborated with Lil Nas X to sell them. The American rapper just released the music video for his song MONTERO (Call Me by Your Name) in which he’s seen giving Satan a lap dance. The sneakers were priced at over US$1,000. And they reportedly sold out in less than a minute.

I’m not making any of this up. It all happened last week.

Nike is now pissed off. The American sportswear giant has sued the company, called MSCHF (mischief, minus the vowels), for trademark infringement. “We do not have a relationship with Little Nas X or MSCHF. Nike did not design or release these shoes and we do not endorse them,” the company said in a statement.

In its lawsuit, Nike said that the “unauthorized Satan Shoes are likely to cause confusion and dilution and create an erroneous association between MSCHF’s products and Nike.”

Fair enough, right? 

However, the Satan Shoes weren’t the only Nike product that MSCHF has customised and sold. The Satan Shoes were actually a follow-up to its line of “Jesus Shoes”, which apparently contained “holy water”. They also sold out in less than a minute.

There were no cries of trademark infringement then. Clearly, it’s all good unless you associate Nike with the devil.

PS: Nike was the official kit manufacturer for English football club Manchester United for 13 years up to 2014. United’s nickname: the Red Devils. 😈

Unofficial Sources: The IIM Tipping Point

If you’ve read our stories about the IIMs or have been following the news about the IIMs recently, you know that the legacy institutions are facing some existential questions. The 60-year-old brand of management institutions now has 21 IIMs spread across India. But they are also facing a “wicked problem”.

A wicked problem is one where a larger problem is made up of a lot of smaller problems, all connected to each other to create one giant jumbled mess.

To unpack that, let’s look at some broad factors that make an IIM:

You see, they all connect to each other. But,

Yeah… it’s wicked alright.

But to understand how the IIM brand got to this point, you need to first understand the institute’s evolution since the 1960s. And the waves of expansion from the original, three legacy IIMs.

Luckily for you, that’s what we dive into in the latest episode of our podcast, Unofficial Sources.

As a treat to you, our subscribers, this latest episode is available early and exclusively on our app! Listen now and let us know what you think by writing to [email protected].

That’s a wrap for today. We are taking Friday off from publishing the newsletter on account of Good Friday. We will see you back on Monday. 

Stay safe,
[email protected]

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