The Singapore start-up Grab made the largest stock-market debut ever by a South-East Asian company this week. The so-called ‘super-app’ went public in a deal that raised $4.5 billion to become valued at $40 billion. However, things went downhill from here as the start-up closed the day’s trading down nearly 21% on the NASDAQ.
Grab has marketed itself as a kind of ‘super-app’ that lets its users carry out a variety of tasks ranging from food delivery and booking rides to insurance, loans and making digital payments. The brand was launched by two Malaysian entrepreneurs in 2012 and it hit the ground running to become the most valuable private company in South-East Asia.
At present, there are over 25 million monthly users of the Grab app across over 450 cities in eight eight different nations. Grab’s current plan is to rapidly expand its services across the fledgling South-East Asian market that has yet to catch up to neighbouring China in terms of products like ride-hailing and grocery delivery.
Will Grab’s gamble work?
Although Grab is a South-East Asian company that continues to focus on that region, it decided to have its IPO in the US as it wished to access a potentially bigger range of investors. The initial gamble appeared to have worked as it broke the record for a US market debut that was previously held by an Indonesian satellite firm in 1994.
From here, there’s every chance that Grab may go public on more global exchanges, and there has been talk of further mergers following the brand’s 2018 acquisition of Uber’s business in South-East Asia.
Grab’s US debut was notable due to the fact that it came about through a merger with a special-purpose acquisition company (SPAC) called Altimeter Growth Corp. Such SPACs are becoming an increasingly popular path for going public with everyone from DraftKings to Playboy following this route.
However there are growing concerns about how SPACs operate as they are essentially shell businesses with no assets of themselves. This has meant that there are planned hearings from Congress about how SPACs will be allowed to function, and this increased scrutiny has caused SPACs to become much less popular on Wall Street.
While the market debt initially opened up 20% higher than Altimeter’s previous closing price, the stock price then plunged back down to finish at $8.75. Although the stock price drop will be disappointing, the flotation will have worked to have provided a cash buffer for Grab’s ambitious projects.
The next period will involve a number of loss-making operations as Grab aims to consolidate and expand its business across South-East Asia. The region’s internet economy is expected to double in value by 2025 and is predicted to be worth $360 billion by then. All of which indicates that Grab’s gamble could soon pay off, despite its short-term disappointments.