WeBull stock rally has one giant problem

After the SPAC craze peaked in 2021, activity slowed to a crawl mirroring the broader IPO freeze, but Webull (BULL) may be signaling a turnaround.

The global trading platform made its Nasdaq debut Friday through a merger with SK Growth Opportunities Corporation, closing its first day at $13.25. On Monday, the stock soared 374.7% to nearly $63.

The deal valued Webull at $7.3 billion, but after Monday’s rally, its market cap has soared to a staggering $29 billion.

The company, which follows a similar model to Robinhood by offering commission-free trading, says it has about 20 million users worldwide.

Webull gained traction during the meme-stock mania of 2021 and had considered going public that same year. But after the 2022 correction, the company shelved those plans.

Webull Group President Anthony Denier told Reuters that the SPAC route “aligns with Webull’s core values of democratization,” letting the market set its valuation rather than traditional underwriters.

“The traditional IPO path has many hurdles that we've encountered over the years,” Denier said.

It wasn’t long ago that SPACs were the hottest ticket to the public markets. In 2021 alone, there were 613 SPAC mergers, accounting for a staggering 63% of all IPOs that year, according to SPAC Analytics.

A year before - 248 SPAC deals, representing 55% of IPO activity. For perspective, before this boom, the record was just 66 in 2007.

Scrutiny over China ties

Webull was founded in 2016 by Anquan Wang, a former executive at Alibaba and Xiaomi.

It operates in 15 markets across North America, Asia, Latin America, and Europe, and is affiliated with Chinese parent Hunan Fumi Information Technology.

Last year, attorneys general from 14 U.S. states launched an inquiry into whether Webull adequately protects sensitive investor data from access by the Chinese Communist Party.

The investigation was led by Indiana Attorney General Todd Rokita.

“We are concerned that Webull may be misleading customers about the privacy and security of their information,” Rokita wrote in a letter to Denier, who leads Webull’s U.S. business.

Denier has described the firm as “both a U.S. and Chinese company,” according to The Wall Street Journal. Despite the scrutiny, Webull is doubling down on global growth.

In an interview with the South China Morning Post, Denier said the company is expanding in Southeast Asia.

“I think Southeast Asia presents a great opportunity to take a lot of market share, because the competition is less intense than it is for developed markets,” he said.

“There’s a lot more opportunity to not only be first to market, but to offer a product and platforms.”

Asked about the U.S. inquiry, Denier maintained that all American investor data is stored domestically and that “no one outside the U.S. has access to any U.S. customer information.”