Singaporean superapp Grab announced yesterday that it plans to go public in the United States – through a $39.6bn merger with a Special Purpose Acquisition Company (SPAC).
The company cited its strong financial performance despite COVID-19 as the reason to become a public company.
Grab said in 2020 that it accounted for 72 per cent of total regional ride-hailing gross merchandise value (GMV), 50 per cent of total regional online food delivery, and 23 per cent of total regional digital wallet payments. The company's GMV in 2020 was $12.5bn, more than double that number from two years ago.
Originally a single-country taxi-hailing app started in 2012, the superapp now operates in eight Southeast Asian nations and has added food and grocery delivery, payments, e-wallets, hotel booking, insurance, and even lending services to its app.
Grab made itself more than useful during COVID-19 lockdowns when consumers needed deliveries and online services, and the unemployed became more open to taking jobs in the gig economy.
Despite the COVID-era success, the company did lay off 5 per cent of its workforce in June 2020. At the time, CEO Anthony Tan said the layoffs were unavoidable, despite cutting costs and focusing more resources on delivery services.
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Grab is so dominant in its home markets that Uber sold its Southeast Asia operations to Grab in 2018 rather than compete. Uber retained a 27.5 per cent stake in that unit.
The SPAC involved in Grab's stock-market debut, Altimeter Growth, will alongside Grab become wholly owned subsidiaries of a new holding company with a pro-forma equity value of approximately $39.6bn.
At closing, the combined company is expected to receive approximately US$4.5 billion in cash proceeds, including more than US$4bn from a fully committed PIPE offering that was upsized due to significant investor interest.
SPACs are controversial because they have no commercial operations and exist solely to raise capital through an IPO, then use the cash for acquisitions that get all the benefits of public ownership without having to go through the investor and regulatory scrutiny required to float.
Some experts therefore regard SPACs as with a dose of suspicion.
Investors in the Altimeter Growth/Grab mashup may not care: they'll be getting exposure to Southeast Asia's emerging markets and youthful, fast-growing population.
Once the new entity lists on NASDAQ in coming months it will trade with the symbol GRAB. ®