🚕 Can Grab Grab The Opportunity?
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🚕 Grab: Grabbing The Opportunity?
Singapore-based technology company Grab Holdings Inc. (GRAB) went public last week. It was the biggest ever US listing by a Southeast Asian firm and the biggest SPAC deal. However, the company's trading debut was anything but record-breaking. (Tweet This)
One-Stop-Shop?
In 2009, Uber shifted the paradigm regarding how people hailed cabs. In June 2012, two other companies embarked on their respective journeys, US-based Lyft and Malaysia-based "MyTeksi," founded by Anthony Tan. Along with fellow Harvard grad, Tan Hooi Ling started MyTeksi with an initial grant of $25K from Harvard and his funds.
Locally known as GrabTaxi, it expanded operations to the Philippines, Singapore, and Thailand by 2013. By 2014, its operations spread to Vietnam and Indonesia, and the company had the largest e-taxi fleet in Southeast Asia when it introduced 100 BYD e6 electric taxis in Singapore. It launched GrabCar - transportation that used personal cars - and GrabBike in Ho Chi Minh City in the same year.
In 2016, the company rebranded itself as just Grab. GrabTaxi, GrabCar, GrabBike, its carpooling service called GrabHitch, and its last-mile delivery service GrabExpress were all brought under the same umbrella.
While Grab was waiting for the Malaysian bureaucracy to approve financial grants from the country’s sovereign wealth fund Khazana, Singapore “grabbed” the opportunity to invest $10M in Grab through its sovereign wealth fund Temasek. Tan renounced his Malaysian citizenship to become a citizen of Singapore. Grab moved its headquarters to Singapore.
Grab has since forayed into food delivery, financial services and merged with Uber's Southeast Asian operations. GrabPay was launched in 2017, GrabFood in 2018, and its insurance, financing services, and payments platform GrabFinancial were also launched in the same year.
It also launched its first cloud kitchen called GrabKitchen in April 2019, and within a year, 50 GrabKitchens were set up in six Southeast Asian countries. It consolidated all its operations into a super app launched in April 2019. Growth by any means was the Mantra.
Apart from Temasek, Grab's other marquee investors included Tiger Global, SoftBank, Chinese ride-hailing app DiDi, China Investment Corporation, Booking Holdings, Mitsubishi, and Microsoft. All said and done, as of last year, Grab had raised over $12B from investors and was valued at $16B.
Yet Another SPAC
At the height of the Special Purpose Acquisition Company (SPAC) boom in the US, Grab agreed to merge with the SPAC Altimeter Growth Corp in April. The deal valued Grab at nearly $40B, a record for a SPAC deal, surpassing Lucid's $24B deal from two months prior.
Altimeter led the investment with a funding of $750M. When trading began on Thursday, Grab's shares gained an altitude of 20% in the initial minutes before turning negative. Shares ended 21% lower on the first day. Grab raised $4.5B in the IPO.
These big numbers apart, the company isn’t yet profitable. In September, Grab cut its full-year net sales forecast, citing the renewed uncertainty over the pandemic-related curbs. Q3 revenue fell 9% Y-o-Y while EBITDA loss widened to $212M. Gross Merchandise Value - the funds that flowed through its network - rose to a record $4B during the quarter.
Grab expects revenue to reach the $4.5B mark by 2023 from $1.6B in 2020. That same year, it expects to turn profitable on an EBITDA basis.
Projections maybe what they are, but the company is grappling with close competitor Gojek in its key market, Indonesia. Gojek merged with Indonesia's leading e-commerce business, Tokopedia, in May this year. The combined entity, GoTo, had a Gross Transaction Value (GTV) of $22B in 2020. GoTo is preparing for a dual listing in New York and Jakarta.
Grab recently procured a digital banking license in Singapore, pitting it against tech conglomerate Sea Ltd which also has a digital banking license. Sea also entered the food delivery space, which increased the competition for Grab.
Thursday may have started with a bang and ended with a whimper for Grab. However, investors will be looking at a couple of items: in the short-term, how effectively the company can utilize the IPO proceeds to consolidate its position in the different markets; in the medium term, at the timeline for the company to turn profitable. Grab has its hands full!
Market Reaction
GRAB ended at $9.00, up 0.11%.
Company Snapshot 📈
GRAB $9.00 +0.01 (0.11%)
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7:00 PM IST: Trade Deficit
Today's Market Terminology: Enterprise Value
Enterprise Value is a measure of a company's total value, often used as a more comprehensive alternative to market capitalization. It include the market capitalization but also the company's short-term and long-term debt, along with any cash on the balance sheet
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