Grab SPAC Trading Begins: Super App Goes Public

Grab Completes SPAC Merger and Begins Nasdaq Trading

Update: Initial market performance has presented challenges.

Grab, a leading super app operating throughout Southeast Asia, has finalized its business combination with Altimeter Growth, a special purpose acquisition company (SPAC).

As a consequence of this merger, Grab’s shares commenced trading today on the Nasdaq Stock Market, identified by the ticker symbol “GRAB.”

The transaction successfully secured substantial capital for the company – amounting to several billions of dollars.

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Recap of the Grab-SPAC Deal

The Grab SPAC merger didn’t generate significant buzz amidst the recent wave of initial public offerings (IPOs), making this an opportune moment for a comprehensive review.

Today, we will revisit the details of the Grab-SPAC agreement, analyze the company’s financial results for the third quarter of 2021, and discuss its initial trading activity.

Preliminary indications suggest a positive reception from the market.

Grab’s Q3 2021 Performance

Here’s a quick overview of key performance indicators from Q3 2021:

• Gross Bookings: Increased significantly year-over-year.
• Revenue: Showed substantial growth compared to the previous year’s third quarter.
• Adjusted EBITDA: Improved, indicating progress towards profitability.

These results demonstrate Grab’s continued expansion and strengthening position within the Southeast Asian market.

Early Trading Performance

Grab’s debut on the Nasdaq has been closely watched by investors and industry analysts.

Initial trading volumes were high, reflecting considerable investor interest in the company’s prospects.

While early gains were observed, market fluctuations are to be expected in the initial days following an IPO or SPAC merger.

Grab’s SPAC Transaction

A challenge faced by numerous Special Purpose Acquisition Company (SPAC) mergers recently involves shareholder redemptions. Essentially, investors in a SPAC have the option to reclaim their initial investment prior to the completion of a merger with an operating company (further details can be found here).

This phenomenon has resulted in some blank-check companies securing less capital than originally projected.

However, Grab did not experience significant redemptions. According to the company’s recent announcement, “Shareholder redemptions were effectively 0%, at 0.02%.”

Consequently, the capital raised through the Grab SPAC deal is expected to align with initial expectations for the super app. Grab confirmed that the “transaction raised gross proceeds of US$4.5 billion in the largest-ever U.S. public market debut by a Southeast Asian company.”

This substantial capital raise is a primary reason for the significance of Grab’s SPAC-led public offering. It represents not only a major event for a large corporation, but also the largest such deal originating from its geographic region.

Furthermore, the company is entering its first official trading day with strong support demonstrated by its SPAC investors.

Early indications suggest a positive market response to the post-combination trading of Grab’s shares. Currently, the stock is up 2.6% this morning, trading at $11.30 per share.

While caution is warranted regarding pre-market trading data, initial signals are encouraging.

What factors are driving investor confidence, leading to substantial investment and increased share value? Let's explore the underlying reasons.

Grab’s Third Quarter Performance

Initial Public Offerings (IPOs) provide valuable insight into private companies, offering a level of transparency often absent when they operate privately. While many private companies prefer to limit public disclosure, we believe this is a misstep. The reporting requirements associated with going public, as was the case with Grab, allow for regular analysis of their performance.

Let's examine Grab’s financial results for the third quarter of 2021. The period presented a mixed picture, with gross merchandise value reaching a record high, offset by a decrease in revenue.

This revenue decline was attributed to significant lockdowns in Vietnam, highlighting both the scope of Grab’s operations and its reliance on specific geographical markets.

Key Business Segment Performance

Here’s a breakdown of how Grab’s delivery, mobility, and financial services segments performed collectively during the third quarter:

The data clearly indicates a notable decline in the company’s revenue during the quarter. A nearly 10% reduction is significant for a technology company focused on rapid growth, where consistent revenue expansion is paramount to valuation.

Furthermore, Grab’s losses have increased substantially compared to the same period last year. Profitability remains a distant goal for the company.

Positive Indicators and Future Outlook

Despite these challenges, several positive aspects warrant attention. The growth in Gross Merchandise Value (GMV) appears robust, particularly considering a decrease in the number of active users (Monthly Transacting Users or MTU).

Looking ahead, envisioning a post-pandemic scenario without widespread lockdowns suggests the potential for growth and improved profitability for Grab. However, these improvements are not yet realized.

Understanding the market’s positive response to Grab shares requires careful consideration. While the third-quarter results revealed increasing losses and declining revenues – a demonstrably unfavorable outcome – investors continue to invest heavily in the company, driving up its share price.

Even amidst a recent downturn in tech stock valuations, Grab demonstrates that optimism persists within the public markets.

• GMV: Gross Merchandise Value
• MTU: Monthly Transacting Users

Grab's Business Segments and Profitability

A key observation regarding Grab is its similarity to Uber. This extends beyond the shared provision of on-demand food delivery and transportation services, encompassing their respective financial structures.

Specifically, Grab's delivery operations currently operate at a loss.

Furthermore, the company’s financial services division also reports negative earnings.

Conversely, the mobility segment produced $64 million in positive segment-adjusted EBITDA. Essentially, the rides business is currently profitable for the company, while other core areas are experiencing losses.

Although mobility profits are substantial, they haven't yet offset the overall company's unprofitability. This mirrors Uber’s situation, where transporting passengers is now a consistently profitable endeavor, even amidst broader financial challenges.

Investor Sentiment

The disparity in investor enthusiasm between Grab and Uber remains an open question. A thorough assessment of Grab’s financial performance over the coming quarters will be undertaken before a final evaluation is made.