Shares in Singapore-based Grab whipsawed in their Nasdaq debut on Thursday after the south-east Asian super app concluded a record $40bn merger deal with a blank cheque company.
Grab, one of the most valuable technology companies in the region, offers food delivery, ride-hailing and financial services. It drew backing from global investors including T Rowe Price, Temasek, BlackRock, Fidelity and Mubadala for the deal.
Shares opened at $13.06 on Thursday, up from the previous day’s close of $11.01, but then fell below $11 in early trading.
Chief executive Anthony Tan said Grab’s super app strategy — the company offers a range of services on its app — made it more resilient during the pandemic than other groups that focus solely on ride-hailing or food delivery. The share prices of Uber, Deliveroo, Lyft and others have had double-digit falls since the summer.
“When mobility is down, food is up. Digital payments also go up. If Vietnam is down, Indonesia is up. That is the beauty of being a regional super app for everyday needs,” Tan said.
Some analysts had questioned if the listing would happen this year. Grab announced the merger deal with Altimeter Growth, a special purpose acquisition company, in April, just as regulatory scrutiny began to deflate a pandemic-era boom in the Spac market.
The deal was then delayed so Grab could work through a financial audit of its accounts in the past three years.
In addition, Grab grappled with the spread of the Delta coronavirus variant over the summer in a number of its major markets including Indonesia and Vietnam and trimmed its earnings forecasts several times.
Nevertheless, Grab, which is not yet profitable, was able to capitalise on investor interest in the digital transformation of south-east Asia to pull off the world’s biggest ever Spac deal. Shareholder redemptions — investors that chose to opt out — were almost zero.
Tan, who will have 60.4 per cent of the voting power while owning just 2.2 per cent the newly listed company, said the Spac route had been the right one. “We got to lock in the valuation early. We got to lock in the best day-one cap table,” he said.
Chris Conforti, a partner at Altimeter Capital, said a lot of the froth had come out of the Spac market following “unscrupulous activity”.
Altimeter put $750m into the so-called private investment in public equity transaction, known as Pipes, that formed part of the deal, a move Conforti described as one of the simple fixes that could be beneficial for the Spac market.
“Spac sponsors should put some money into the Pipe . . . you should lock up your sponsor’s promote. I don’t think you should just be able to walk away with that. There should be short-term and long-term alignment,” he said, arguing Grab could be held up as a model.
Even so, shares in Altimeter Growth have been volatile since the Grab deal was announced. Analysts said this was likely to ease.
“Once [Altimeter Growth Corp] starts trading as Grab, that will change; it won’t trade as a function of the Spac market but rather as a fundamental business,” said Nirgunan Tiruchelvam, an analyst for Tellimer. “South-east Asia is on the verge of a tech boom and Grab is front and centre in that story.”
This article has been amended since publication to clarify that Grab is not the most valuable tech company in south-east Asia.