Grab, Southeast Asia’s largest ride-hailing and delivery company was founded in 2012 by Tan and Hooi Ling Tan. Today, it is counted among the most promising startups in Southeast Asia and a leading candidate for public markets. Now, why is that, you might choose to ask? The business model is similar to Uber, a US ride-hailing and delivery company, which sold its Southeast Asia operations to Grab in 2018. The company has the backing of Didi Global Inc, Toyota Motor Corp, and Masayoshi Son’s SoftBank Group Corp Vision Fund.
The strong open
Grab opened with a bang! It garnered a market capitalization of about USD 51.6 billion.
USP and reach
What makes Grab a standout is its super app strategy. Hooi Ling Tan, the co-founder, regards Grab as a combination of Uber, DoorDash and Venmo. While the Covid-19 pandemic has hampered ride-hailing services and put forth travel restrictions, the super app strategy has enabled it to be resilient to Covid challenges. Currently, Grab offers ride-hailing, delivery and financial services in over 400 cities across Southeast Asia.
The rough first day at the market
On 2nd Dec 2021, Grab Holdings Ltd went public by merging with Altimeter Growth Corp, a special-purpose acquisition company or SPAC. Grab raised USD 4.5 billion and stood (valuation) at almost USD 40 billion (before going public). Now, it was the biggest deal on the record, according to Dealogic. Also, it marks the largest US market debut by a Southeast Asian company. This superseded the previous record set by an Indonesian satellite company, which had raised nearly USD 1.2 billion back in 1994.
But, on the first day, the share prices slid by a whopping 21 per cent to USD 8.67 at 1:30 pm in New York.
Into the downfall
The share price opened at USD 13.06. And at the end of the day, it slipped down to USD 8.75. As for Altimeter Growth Cap, it had closed the previous day at USD 11.01. Altimeter had gone public at the USD 10 mark. And Grab had now plunged significantly below it.
And the reason for this price slump? The market observers are wary! They are at splits regarding the prospects for Grab. While some laud the company for its regional reach and expansion, others mull over its high cash burn.
The journey to the market
Grab entered the public stock market using quite an unconventional route. Earlier, combining with SPACs was sneered on Wall Street but not anymore. This method has gained considerable popularity over the past year. Recently, several major companies have taken the SPAC route to Wall Street. Some of the bigwigs are Playboy and DraftKings. Lucid Motors and Arrival, the electric vehicle startups, also launched using this path.
What is a SPAC?
SPAC, an acronym for special-purpose acquisition company, is a shell company with limited or no operating assets. A SPAC usually goes public with the intent of raising money from investors. A SPAC then uses these funds to buy existing businesses.
In its deal with Altimeter Growth Corp, Grab raised funds from investment corporations such as Fidelity, BlackRock, T. Rowe Price, Mubadala, an Abu Dhabi-based sovereign wealth fund, and Temasek, a Singapore government-backed investment arm.