By the Horn - Grab’s Big Public Merger and What it means for Southeast Asian Unicorns

According to the Financial Times, Grab is reportedly going public on the New York Stock Exchange (NYSE) via the biggest special purpose acquisition company (SPAC) merger to date with Altimeter Capital, a US-based, tech-focused investment firm. The deal could be finalized as soon as this week, and would see the “super app” valued at USD35 billion. Varun Mittal, Global Emerging Markets FinTech Leader at Ernst and Young spoke to us about why Grab is being listed through a SPAC, and what this could mean for other Southeast Asian start-ups.

1. Why list via a SPAC?

There are different ways of going public, such as through a SPAC, direct listing or traditional initial public offering (IPO), each with their own pros and cons. A SPAC listing is seen as a more expedient route, as it works with an existing listed company (also known as a “blank-cheque” company). 

2. Why choose the US?

Grab likely has a variety of reasons for choosing to list on the NYSE over other stock exchanges in the region. There is generally higher liquidity and more institutional investors in US markets, and it’s easier to benchmark against global models that allow them to seek higher valuation.  

3. Multiplying Value

How do you value a “super app” like Grab? Varun said all public companies are valued by discounted future value, i.e. observing future potential and putting a current value on it. For super apps, their value comes from the fact that they are becoming banks themselves, with all sorts of businesses networked through their services, such as advertising, merchant acquiring payment systems, and lending and insurance distribution, all of which creates a flywheel effect.

4. Risky Business

Listing via a SPAC is not without its risks, but Varun views that such transactions are based on willing buyer, willing seller. Could Deliveroo, another food delivery platform which listed last week in London and flopped, be a cautionary tale for Grab given its lack of presence in the US? Varun explained that Deliveroo faced external factors, namely new UK laws that required gig companies to classify their workers as employees, which investors saw as impacting the foundation of the business. At this stage, Varun doesn’t see Grab being impacted by similar legislative trends in Southeast Asia.

5. Setting Precedent?

Could Grab’s trajectory set a precedent for other unicorns in Southeast Asia like Gojek and Tokopedia? Ultimately, Varun believes that each company decides what is right for them. There are many considerations at play, including the timing, who are the cornerstone investors, and what are the lock-in options. A SPAC listing could be an option for companies with existing investors that already own a SPAC vehicle, and this could allow a faster route to an IPO.

What do you think of Grab’s chances? Is it too big a risk at this point? Or are they in a perfect position to succeed? Let us know your opinions. 

Written by Toby Teh and edited by Shazana Mokhtar