Southeast Asia’s ride-hailing giant Grab fell sharply on its first day trading on the Nasdaq, after becoming the largest-ever company to close a SPAC merger and go public.
Shares opened the trading day at $13.06 apiece under ticker symbol “GRAB,” following a deal with Altimeter Growth Corp. that valued the four-time CNBC Disruptor 50 company at nearly $40 billion. But they lost more than a fifth of their value by Thursday’s closing bell, finishing more than 20% lower at $8.75 apiece.
Grab, ranked No. 16 on last year’s CNBC Disruptor 50 list, sells an array of digital services such as transportation, food delivery, hotel bookings, online banking, mobile payments and insurance services from its app — earning the “super app” title. It operates in most of Southeast Asia, serving more than 187 million users in over 465 cities across eight countries. Still, revenue at the company was down 9% year-over-year as net losses expanded to $988 million, up from $621 million.
Grab’s early backers include SoftBank, Toyota, Hyundai Motor and China’s Didi Chuxing, among others.
“We don’t view growth and profitability as mutually exclusive. We operate in a market with a large market opportunity and low penetration across our verticals,” Grab co-founder and CEO Anthony Tan said Tuesday on CNBC’s “Squawk Box.” “We do believe we have a cost leadership advantage.”
A SPAC, which stands for special purpose acquisition company, is created to raise capital from public markets and then use that cash to merge with a private company and take it public within a two-year timeframe.
Investors in SPACs as a rule do not know the identity of the firm that will be targeted for merger. After a blockbuster year, there are currently over 400 SPACs actively looking for a target company, according to data from Wolfe Research.
The Grab deal included a record $4 billion private placement led by Altimeter Capital Management. So-called PIPE financing is a mechanism for companies to raise capital from a select group of investors that make the final market debut possible. BlackRock, T. Rowe Price Associates, Morgan Stanley Investment Management’s Counterpoint Global arm and Janus Henderson Investors are also participating.
“Anthony, [Tan Hooi] Ling, and the rest of the talented management team at Grab have built a superapp across mobility, delivery, and financial services — together which has the potential to fuel the dramatically changing and growing digital economy in Southeast Asia”, said Denny Fish, portfolio manager and technology sector lead at Janus Henderson Investors said in an email to CNBC. “Given its purpose based mission, Grab is in a unique position to benefit from this historical shift.”
The proprietary CNBC SPAC 50 Index, which tracks the 50 largest U.S.-based pre-merger blank-check deals by market cap, soared earlier this year but has since suffered a steep decline and is now negative on the year. The CNBC SPAC Post Deal Index, which is comprised of the largest SPACs that have come to market and announced a target acquisition, has seen its year-to-date gains wiped out.
Still, the SPAC market staged a comeback before the recent market turmoil triggered by the omicron variant, with issuance hitting an eight-month high as the industry continues to ride out regulatory challenges. The number of new deals in October nearly doubled that in September and was also higher than the total during the same time last year, according to SPACInsider and CNBC calculations.
Source: CNBC
Two Senior Grab Executives Quit as Company Rejigs Unit to Stem Losses
SINGAPORE - Two top executives at Grab Holdings' fintech business have quit, adding to other senior departures in recent months, as the Southeast Asian ride-hailing and delivery firm rejigs the key unit at the loss-making group, two sources said.
Chris Yeo, who heads Grab's payments and rewards business and has been with the company for nearly six years, is leaving along with Jeffrey Goh, who leads the payments gateway business, the sources familiar with the matter told Reuters.
Both Yeo and Goh worked at the Grab Financial Group's GrabFin unit, which provides digital payments, financing, insurance, rewards, and wealth management services, and is an important plank of Grab's regional growth strategy.
The latest executive departures come as Grab's losses rose to $3.6 billion in 2021 from $2.7 billion a year earlier, while revenue rose 44%, with investors focusing on how the firm plans to stem losses.
Grab narrowed its loss in the first quarter.
Since listing on Nasdaq in December after a record $40 billion merger with a blank check firm, Grab's shares have shed three-quarters of their value against a backdrop of plunging tech stocks and its continued losses.
"Many business groups within GrabFin have been put on notice with significant performance metrics," said one of the sources. "There's an intense focus on getting to profitability."
Yeo and Goh, managing directors at Grab, which counts SoftBank Group Corp's Vision Fund and Uber as its biggest shareholders, are serving their notice periods, said the sources, declining to be identified as they were not authorised to speak to the media.
The news of their exits and the rejig at GrabFin has not been made public previously.
The departures at GrabFin come a month after Grab's head of lending, former banker Ankur Mehrotra, who played a key role in the fintech unit's expansion, quit after a six-year stint.
This year, one of Grab's senior tech executives also departed to lead a cryptocurrency gaming firm, while Grab's head of insurance and wealth left to form a startup.
Grab declined to comment specifically on the executives' departures. There was no immediate response from Yeo and Goh to a Reuters query.
In an email response to Reuters, Grab said it was focused on expanding its regional fintech ecosystem and saw significant opportunity in Southeast Asia across all its businesses.
It said its fintech operations would now be led by its country teams.
GROWTH POTENTIAL
Grab last week forecast a rebound in its mainstay ride-share and food delivery businesses as Southeast Asian economies recover from a pandemic-led slump.
Anthony Tan, Grab's co-founder and CEO, told analysts that Grab was driving towards profitability through disciplined cost management.
GrabFin was streamlining its regional and country teams with a view to focus on lucrative areas, the sources said. One of the sources said the company was seeking to cut losses in the many areas GrabFin operated in.
Grab, which operates in 480 cities in eight countries in Southeast Asia, has more than five million registered drivers and two million-plus merchants on its platform. The company sees GFG as a business with huge growth potential.
Grab's regional digital banking business, which includes a digital banking joint venture in Singapore and Malaysia, is also part of GFG. Grab also acquired a minority stake in an Indonesian bank this year.
https://money.usnews.com/investing/news/articles/2022-05-25/exclusive-two-senior-grab-executives-quit-as-company-rejigs-unit-to-stem-losses-sources
Grab could face class action suits in US following recent share price dive
SINGAPORE - Nasdaq-listed super-app Grab could face class action lawsuits, with several United States law firms calling for shareholders to contact them to investigate claims on their behalf.
The mounting of such investigations, which is fairly commonplace for listed firms in the US, comes after Grab's shares crashed last week, falling about 37 per cent on March 3 after it announced a fourth-quarter net loss of US$1.1 billion (S$1.5 billion).
Its results came amid a worse-than-expected drop in revenue, due to higher incentives being paid out to attract drivers and consumers.
Singapore-headquartered Grab's shares last closed at US$3.36 on Monday (March 7), a far cry from the US$13.06 it reached on the day of its listing last December.
At least eight law firms have announced their intention to investigate Grab for matters such as false and misleading statements, possible fraud and other violations of US federal securities laws.
Grab declined to comment when contacted by The Straits Times.
Professor Lawrence Loh, director of the Centre for Governance and Sustainability at the National University of Singapore Business School, noted that listed firms in the US regularly face class action suits in a variety of matters, including possible violations of securities laws.
"In recent years, there are, in particular, class action suits against non-US issuers, especially those from China. The trend for class action suits is primarily driven by the permissibility of contingency fee arrangements, where the lawyer receives a pre-agreed percentage of the awarded damages," he said.
In addition, there are many law firms that specialise in class action suits for securities laws, and actively monitor unusual stock losses and seek shareholders who incurred significant damages to lead the suits, Prof Loh added.
In stock drop lawsuits, lawyers seize on a plunge in stock price as evidence that a company failed to be forthcoming about looming bad news.
More at https://www.straitstimes.com/business/companies-markets/grab-could-face-class-action-suits-in-us-following-recent-share-price-dive
Grab Reported Loss of Over S$1 Billion in 3 Months; Share Prices Have Been Falling Since It Was Listed
When Grab Holdings Inc was first listed on Nasdaq—an American stock market based in New York—after a merger with special purpose acquisition company (SPAC) Altimeter Growth Corp in December 2021, it was expected to value at US$40 billion.
In the first quarterly result released by Nasdaq on Thursday (3 Mar), Grab reported a net loss of $1.055 billion for the three months from December, widening from a $576 million loss a year earlier.
This places Grab’s annual loss at approximately $3.4 billion, a grim increase compared to the $2.6 billion loss in 2020.
While the figures look like Grab is faring poorly, the co-founders of Grab, Anthony Tan and Tan Hooi Ling remain optimistic for the coming year, believing that the company’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) will turnaround in 2023.
However, what are the reasons that led to Grab’s financial losses and share prices dropping?
Well, there are a few contributing factors, to be honest.
COVID-19 Pandemic
Owing to the outbreak of the pandemic in the Southeast Asian region where Grab’s main market is, namely Cambodia, Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, any ride-hailing or e-commerce company has been facing its highs and lows.
For instance, the pandemic led to a decrease in ride hailing by 11% in 2021, but the demand in delivery services climbed by 52%.
The growth in Gross Merchandise Value (GMV) has increased by 26% to $4.5 billion in the fourth quarter of 2021.
In the whole of 2021, the sum of transactions across all its platforms tallied up to US$16.1 billion, which is higher than the projection of US$15 billion to US$15.5 billion.
Though there was a slight dip of 2% in average monthly transacting users (MTU) from year to year due to lockdowns and circuit breakers in the third quarter, Grab ended the year strong, with 27,700,000 MTUs in December, higher than any month in 2021.
In general overview, Grab seems to have negated its ride-hailing losses through its delivery services and expansion into financial services.
In fact, the pandemic might have indirectly helped its growth due to the surge in demand for contactless delivery services.
Another potential market that Grab is already tapping into is the online grocery market, which is expected to triple to US$11.9 billion in 2025 from US$4.1 billion in 2020, according to Euromonitor International.
However, all these pretty figures have yet to take into account the investment and incentive costs, plus the initial sunk cost of getting listed in the first place.
Initial Listing Costs and Non-Cash Interest Expenses
In order to become listed on Nasdaq in the first place, Grab Holdings had to spend around $363 million, a one-time public expense that was paid in December.
According to an official statement from Grab, its losses of $3.6 billion in 2021 also include $748 million non-cash items such as interest charges accrued on Grab’s redeemable preference shares, stock-based compensation and fair value changes on investments.
Incentive Spending
However, Grab’s greatest expenditure is definitely attributed to incentive spending, or better termed as short-term and long-term investments.
While Grab’s GMV revenue has increased, the profit margin was cut severely by its massive spending on incentives, namely consumer discounts and driver incentives.
For the consumer incentives alone, like customer discounts and promotions, Grab’s spending doubled to $263 million in the fourth quarter.
In terms of delivery incentives, Grab spent US$443.3 million in the last quarter, almost double of the year earlier.
For the entirety of 2021, Grab’s incentive spending rose to US$1.78 billion from US$1.24 billion the previous year.
Therefore, the question to ask now is, why is Grab spending so much on incentives and investment?
According to Chief Financial Officer (CFO) Peter Oey, he stated: “We plan to be judicious and disciplined in allocating capital, as we double down on long-term growth opportunities of our on-demand, advertising, and financial services businesses.”
Most notably in its long-term plans, Grab Holdings is pouring money into attracting drivers as ride-share demand recovers from pandemic lows, and it has started to offer aggressive food-delivery promotions as people begin to dine out more often with the easing of COVID-19 restrictions.
For these reasons, the accounting revenue fell by 44% on the year to $122 million.
Competition from SEA Limited and GoTo Group
Besides Grab Holdings, there are two notable competitors vying for the Southeast Asian market - SEA Limited and GoTo Group.
These three companies are each a combination of ride-hailing, food delivery, financial services, and mobile gaming.
But regardless of which blend of services it offers, the three companies pursue the same goal: they are attempting to bring hundreds of millions of consumers together into a network of services.
As for SEA Limited, it is also based in Singapore and it’s highly likely that it has infiltrated your lives without you fully realising it.
Simply put, SEA Limited is the overarching parent group of the e-commerce company Shopee, with a gaming sidearm subsidiary called Garena.
For a bit more detail into Garena, it is the developer and publisher of the popular mobile game Free Fire, and the SEA region for the Multiplayer Online Battle Arena (MOBA) game League of Legends runs under its game client.
SEA Limited is the biggest behemoth among the three companies; ever since it was listed in Nasdaq in 2017, its market value has increased seven-fold by 2019 to $145 billion, making it the largest listed firm in Asia.
The other competitor in the SEA region is the GoTo Group, which is formed from the merger of Indonesia-based ride-hailing Gojek and e-commerce company Tokopedia.
According to Singapore DBS Group Holdings, one of the impetus behind the generous incentives and consumer discounts that Grab has been dishing out since early 2022 is to render its rival’s GoTo’s mobility business in Singapore irrelevant.
The same increase of incentive spending can be expected in Indonesia from Grab, where the GoTo Group has a steady foothold of a fleet of 2 million drivers, and its total transactions in its own homebase have reached $22 billion, which is 2% of Indonesia’s GDP.
In order to compete and stay relevant, Grab really has no alternative but to spend more on its investments and plan for the long haul.
Stock Plunge on Nasdaq
Regardless of how justified Grab’s incentive spendings and financial decisions are, it doesn’t change the fact that its stocks have plummeted by 63% since its debut, making it one of the worst performers on the Nasdaq Composite Index.
The drop has swept out at least US$22 bullion (S$29.85 billion) from Grab’s market capitalisation.
Worse, Grab shares dropped by 37% on Thursday (3 Mar) after the resulting posting, as 115 million shares changed hands, which is more than four times the average over the past month.
In the eyes of the investors, the constant losses that Grab has been racking up since its founding has only proven that it has yet to reach its profitability. The fact that its fortunes have risen and fallen along with COVID-19 infection rates doesn’t help matters either.
However, other analysts like Stephanie Cheong from Moody noted that Grab is currently holding onto the leading position in ride-hailing and food delivery across the SEA region, compared to the likes of FoodPanda or Deliveroo.
Grab is showing that it has good long-term growth prospects, only bolstered by its commitment to exercise cost discipline, and as long as the company continues to have substantial cash holdings, it should be able to fund its large operating losses and cash burns over the next two to three years.
Cheong adds, “At the same time, the rating reflects uncertainties around Grab’s ability to achieve sustained profitability as low switching costs for customers, drivers, and merchants, as well as higher competitive intensity from existing and new players, could disrupt the company’s path to profitability.”
In short, it’s difficult to speculate how successful Grab will be when it’s confronted with a list of variables.
Will it come out ahead, like how it managed to surpass Uber in the battle of attrition in 2018? Or will it suffer a similar fate as Uber, where it gets trampled by its competitors?
More at https://goodyfeed.com/grab-losses-incentive-spending/
Technical analysis shows that buying in right now is akin to trying to catch a falling knife; if you are really a sucker for GRAB at least wait till its market price first closes above the VWAP before making your move.
JHK CEO Anthony Tan has already grabbed his GCB and can live happily after liao, for the rest of the investors it's you die your own business. Song boh?
Kaoz Grab has now fallen to 7.12 USD!!!!!!
If not for the substantial backing by SoftBank it is rather inexplicable a company like GRAB which has been bleeding red ink for years is even permitted to go public, not to mention doing so in such a brashedly loud manner via a SPAC vehicle. I wonder what the fuck Masayoshi Son sees in this glorified teksi "super app" that makes him wanna continue plugging the leaks with no end in sight.
https://www.businesstimes.com.sg/garage/grab-tumbles-33-on-nasdaq-debut-day-fails-to-sustain-initial-surge'
Wah Grab lao sai until sibei jialat sia