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5 Things to Know About Grab’s Listing Via SPAC

Grab raised $4.5 billion through the largest SPAC listing on Nasdaq by a Southeast Asian company.


Grab Holdings Limited (Grab) first announced plans to list on the US-based NASDAQ exchange in April 2021. However, due to delays caused by a review of its financials, it was finally listed on 2 December 21 under the ticker symbol (Nasdaq: GRAB). The listing valued Grab at $39.6 billion and is the largest listing by a Southeast Asian company. The bell-ringing ceremony, which was held in Singapore, also marked Nasdaq’s first such event to be held in Southeast Asia.

Here are 5 things you need to know about Southeast Asia’s Superapp giant, Grab.

*Figures quoted in this article were accurate as of 13 December 2021 and in US dollars.

Read Also: Why Do Some Companies Like Grab Prefer Listing Through SPAC Merger And What Should Investors Know About The Process?    

#1 Largest SPAC Listing And PIPE Financing

Grab listed on Nasdaq through SPAC sponsor, Altimeter Growth Corp (AGC), and raised $4.5 billion. $4 billion was from a fully committed Private Investment in Public Company (PIPE) financing, the largest ever raised. Its sponsor, Altimeter committed to an investment of $750 million and a three-year lock up of its Grab Class A shares. Altimeter is run by CEO and founder, Brad Gerstner who has also invested in other technology related companies such as Expedia, Zillow, Facebook, Uber and Snowflake.

The remaining $3.265 billion was raised from other big investors, including funds and accounts managed or advised by BlackRock, Counterpoint Global (Morgan Stanley Investment Management), T. Rowe Price Associates, Fidelity International, Janus Henderson Investors and Temasek.

Read Also: What Is Special Purpose Acquisition Company (SPAC) And How Is It Different From Conventional IPO?

#2 Grab Is Southeast Asia’s Leading Superapp

Grab is marketed as a single “everyday everything” app, also known as a “Superapp”. According to Grab’s SEC filing, a “Superapp” is an integrated mobile application of many applications that aims to provide a one-stop marketplace platform with multiple offerings delivered via a single technology platform and third-party integrations.

Grab offers its services in the delivery, mobility and financial services sectors across 465 cities in eight countries in the Southeast Asia region – Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. There are around 22 million monthly transacting users as of 30 September 2021.

Euromonitor International had identified Grab as the category leader in 2020 by Gross Merchandised Value (GMV) in the food delivery and mobility category and by Total Payment Value (TPV) in the e-wallet payments category in Southeast Asia.

Grab has an overwhelming share of 72% by GMV in the ride hailing or mobility category compared to its closest competitor, who has a 15% share of the market. Grab also has half of the total online food delivery market, whereas its closest competitor, has only a 20% share. The e-wallet category is also dominated by Grab, with a 23% share, whilst its closest competitor has a 14% share.

Read Also: Complete Guide To Grab Subscription Plans

#3 Grab’s Business Model – Grab Ecosystem Flywheel

The Grab ecosystem is a single, seamless platform that binds three superapps, one each for Grab’s driver, merchant-partners and consumers. These superapps provide hyperlocal offerings, including deliveries, mobility and financial services offerings to millions of Southeast Asians consumers every day.

Grab’s platform functions as an intermediary by connecting millions of consumers to its millions of drivers and merchant-partners to facilitate interaction and trade. The continuous interactions on Grab’s platform amongst these participants and the interactions between these participants and Grab’s platform, create a vibrant ecosystem, which is highly synergistic for Grab’s business. With more offerings by Grab, consumer spending and engagement increase. This is termed as the “Grab ecosystem flywheel”.

Source: SEC filing

#4 Grab’s Growth Potential By 2025

According to Grab, the Southeast Asia market is in its early stages of online disruption and offers the most attractive opportunities globally. The population in the region is estimated to be around 660 million and is expected to have a GDP compounded growth rate of 7% annually from 2020 to 2025. Euromonitor estimates Grab’s addressable market to be over $185 billion by 2025, up by 250% from the addressable market size of $52 billion in 2020.

Ride-Hailing

In 2020, the ride-hailing market is estimated to be worth around $4.5 billion. This translates to an on-demand mobility penetration of around 3% compared with 12% in China and 5% in the United States based on the percentage of total expenditure on ride-hailing compared to total expenditure on land mobility. Euromonitor forecasts that the mobility market will reach $19 billion by 2025, with online penetration reaching 8%.

Delivery

The delivery offerings on the Grab platform include prepared meals, groceries and point-to-point delivery services. Looking at the online food delivery market for prepared meals, the market size in 2020 is around $9 billion representing a penetration rate of 12% compared with 21% in the United States and China. According to Euromonitor, by 2025, the penetration rate will be 16.5%, with market size of $28 billion.

E-Wallet Payments

60% of adults in Southeast Asia are either unbanked or underbanked, according to Euromonitor and most of the commerce is conducted by cash transactions. The e-wallets market is estimated to be worth $39 billion in 2020, or 4% of total cash transactions in Southeast Asia. Together with the regional governments’ push for a cashless society, the e-wallets market is expected to grow to $138 billion, representing a cash transaction penetration of over 10% by 2025.

 

Source: Euromonitor International Analysis, SEC filing

#5 Risk Factors Faced by Grab

Amongst the many risks highlighted in the SEC filing, one of the more pressing issues for Grab is the intense competition across the segments and markets that it operates in. It highlighted that Gojek is a key competitor in the deliveries, mobility and financial services offerings in Indonesia. In May 2021, Gojek merged with e-commerce company, Tokopedia to form GoTo, the first platform in Southeast Asia to combine e-commerce, on-demand services and financial services. GoTo has similar plans to list the company to fund its expansion plans in the Southeast Asia market. Grab also identified Foodpanda being another big competitor in the meal and delivery offerings.

Another risk highlighted by Grab, is that if it were required to reclassify drivers as employees or if driver-partners and/ or employees unionized, there could be adverse business, financial, tax, legal and other consequences. For example, in Singapore, an advisory committee on platform workers was set up to provide recommendations on how to better protect gig workers. Other governments may also follow suit with similar legislation to protect gig workers that might drag down Grab’s financial performance.

Should You Invest in Grab Now?

Despite reaching a high of $13.29 on its opening day, Grab’s stock has plummeted by 45% to close at $7.12 on 10 December 21. The weak stock performance can be attributed to the ongoing pandemic measures that resulted in lockdowns for long periods in many of the Southeast Asian countries. Moreover, the discovery of the third variant of the coronavirus, Omicron in late November 21, has also dampened investors’ expectations for improved results in the near term.

Grab operates in an uncertain environment and faces headwinds from competitors and future legislation. However, given its pole position in the verticals that it operates in and the capital injection from its listing, the company believes in its potential to become the dominant Superapp-player in the Southeast Asian market.

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