Shares of the Mark Cuban-backed digital banking app Dave (DAVE) are getting creamed today after the company completed its merger with a blank check company and began trading independently on the Nasdaq. The stock traded more than 34% down in the final hour of trading today.
In June 2021, the special purpose acquisition company (SPAC) VPC Impact Acquisition Holdings III announced its plan to merge with Dave at a $4 billion enterprise value. The app was initially launched in 2017 with the intent to help Americans save on overdraft fees and has quickly grown to 11 million users, closing in on Chime-like numbers.
The company began trading on the Nasdaq yesterday already below its net asset value of $10, and since then it's simply been a bloodbath with the market cap down around $1.86 billion.
It is not uncommon for stocks to take a hit once they de-SPAC, as investors have been skeptical over the financial projections coming out of SPAC takeover targets. There has also been very little trading volume on the stock, and in general, it's a bad time to invest in fintech with everything happening at the Federal Reserve.
At an initial glance, while the massive user base is an incredible feat, I do not love this business model. Right now, it still seems to be predicated on helping people save on overdraft fees, which the banking industry has been moving away from.
The company offers other products including bank accounts, so the revenue potential is there with so many users, but in these kinds of market conditions, the company is going to have to prove it. The $4 billion enterprise value seemed way too high.