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Grab's US$40b Nasdaq debut to set tone for Southeast Asian tech listings

Grab's US$40b Nasdaq debut to set tone for Southeast Asian tech listings
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SINGAPORE (Dec 2): Grab, Southeast Asia's biggest ride-hailing and delivery firm, makes its market debut on Thursday (Dec 2) after a record US$40 billion (about RM169.12 billion) merger with a special purpose acquisition company (SPAC) in a listing that will set the tone for other regional offerings.

The back-door listing on the Nasdaq marks the high point for the nine-year-old Singapore company that began as a ride-hailing app and now operates across 465 cities in eight countries, offering food deliveries, payments, insurance and investment products.

The biggest US listing by a Southeast Asian company follows Grab's April agreement to merge with US tech investor Altimeter Capital Management's SPAC, Altimeter Growth Corp, and raise US$4.5 billion, including US$750 million from Altimeter.

There is scope for many players in the fragmented food delivery and financial services markets in Southeast Asia, a region of 650 million people, but the road to profitability could be a long one, analysts have said.

Grab's flotation "will provide a bigger cash buffer" to its "cash burn", S&P Global Ratings said in a note. But the company's "credit quality continues to be constrained by its loss-making operations, and free operating cash flows could be negative over the next 12 months".

Southeast Asia's Internet economy is forecast to double to US$360 billion in gross merchandise value (GMV) by 2025, prompting Grab's rivals, including regional Internet firm Sea and Indonesia's GoTo Group, to bulk up.

GoTo plans a local initial public offering in 2022 after completing an expected US$2 billion private fundraising, sources have told Reuters. A US listing will follow the Jakarta offering.

"For the longer term, we're really excited about Grab Financial Group", a unit of the company, said Chris Conforti, a partner of Altimeter Capital. "I think the bell curve on that is much wider in terms of what the outcome could be, but it could be extremely large."

Bonanza for backers

Grab was founded by Anthony Tan, its group chief executive officer (CEO), and Tan Hooi Ling, who developed the firm from an idea for a Harvard Business School venture competition in 2011. The two Tans are not related.

Group CEO Tan, 39, expanded Grab into a regional operation with a range of services after launching it as a taxi app in Malaysia in 2012. It later moved its headquarters to Singapore.

"What we have shown to the world is that home-grown tech companies can develop great technology that can compete globally even when international players are in town," Tan told Reuters in an interview on Wednesday. "We can compete and win."

He will end up with 60.4% voting rights along with Grab co-founder and president Ming Maa, but control only a 3.3% stake with them.

To mark the New York listing, Grab and the Nasdaq will hold a bell-ringing in a luxury hotel in Singapore in the middle of the Asian night. About 250 people, including executives of the exchange, Grab's investors and other partners are set to attend.

Grab's listing brings a payday bonanza to early backers such as Japan's SoftBank and Chinese ride-hailing giant Didi Chuxing, which invested as early as 2014.

They were later joined by the likes of Toyota Motor Corp , Microsoft Corp and Japanese megabank MUFG . Uber became a Grab shareholder in 2018 after selling its Southeast Asian business to Grab following a five-year battle.

In September, Grab cut its full-year adjusted net sales forecast, citing renewed uncertainty over pandemic curbs on movement.

Third-quarter revenue fell 9% from a year earlier and its adjusted loss before interest, taxes, depreciation and amortisation (EBITDA) widened 66% to US$212 million. GMV in the quarter rose to a record US$4 billion.

It aims to turn profitable on an EBITDA basis in 2023.

JPMorgan and Morgan Stanley were the lead placement agents for the fundraising, while Evercore and UBS were the co-placement agents.