Before it started publicly trading, Grab was valued at US$40 billion, almost as much as American Airlines, Delta Air Lines and United Airlines combined. Tan, only 39 at the time. Even the date of Grab’s listing seemed auspicious. It read the same backward and forward: 12 02 2021. An eight-digit palindrome date will happen only 12 times this century.
Grab Is Down 70% - Tan and his co-founder, Tan Hooi Ling, rang the Nasdaq opening bell remotely from the Shangri-La. A blizzard of confetti showered the room. The Queen song We Are the Champions blasted out. But almost before the confetti hit the floor, Tan’s luck turned. The stock plunged 21% by the close of the trading day. Then it fell more. Even after a recent bounce, Grab is still down almost 70%.
Grab had raised money in a complicated maneuver involving a corporate structure called a special purpose acquisition company, or SPAC. It was, and remains, the biggest SPAC deal in histor
Burn Investor Capital - Devadas Krishnadas, director of local consultant Future-Moves Group, says startups need to do more than burn investor capital and tout their growth potential. Singapore’s aspirations for tech-powered growth have been predicated more on promise than performance.
Who Is Tan - Tan grew up in Malaysia and started his business in a storage room 11 years ago. In the country’s capital, Kuala Lumpur, his company, then called MyTeksi, let customers summon a taxi with a smartphone.
Tan comes from a family of entrepreneurs. His grandfather made a fortune in the auto industry, co-founding Tan Chong Motor Holdings Bhd in 1957 to assemble and sell Nissan cars in Malaysia. His father is president of the publicly traded company.
Like many elite Asians, Tan pursued his higher education in the US, studying economics and public policy at the University of Chicago before getting his MBA from Harvard University.
Two years after starting his company, Tan met in Tokyo with Son, the SoftBank founder and chief executive officer. Son had earned renown for his wildly successful bet on Alibaba Group Holding Ltd, China’s Amazon. SoftBank committed US$250 million to Tan’s business. In 2014 the company moved to Singapore and later changed its name to Grab as it prepared to accelerate its expansion across the region. (In 2020 the company opened a second headquarters, in Jakarta.)
On March 26, 2018, Grab bought Uber Technologies Inc’s Southeast Asian business in return for a 27.5% stake in Grab. It was a major victory for Tan as Uber withdrew from the region. Grab integrated Uber Eats into an existing meal-delivery business and branded it as GrabFood later that year.
SoftBank - would invest about US$3 billion in Grab. Tan started to refer to his company as Southeast Asia’s leading “everyday super-app,” handling transportation, deliveries and financial services. With encouragement from the company’s ubiquitous advertising, Grab customers got used to highly discounted rides.
Public Traded - By 2020 investors saw Grab as a promising candidate to go public. Tan eventually settled on an exit strategy: the SPAC. In a complex arrangement, a sponsor—in Grab’s case, US-based Altimeter Capital Management—sets up a shell corporation and seeks to merge it with an actual company that has real operations, namely Grab. If an agreement is reached, they combine, and - the actual company is now publicly traded.
Grab had fewer than 25 million monthly users at the time. Southeast Asia had a smaller middle class and lower per-capita income (compared to China). Grab had raised US$12 billion in venture financing before the SPAC deal. Grab spent US$480 to win a customer, who’d then spend an average of US$29 a year. It would take Grab more than 16 years to recoup its money.
Dual-Class Share Structure - Tan controls 63% of Grab’s voting rights while holding only about 3% of its common stock. While technology companies often use dual-class share structures, Grab’s arrangement is striking because Tan owns such a small percentage of common shares compared with, say, Mark Zuckerberg, who holds a roughly 13% stake in Facebook parent Meta Platforms Inc. SoftBank remains Grab’s largest shareholder, with a 19% stake. Uber still holds a 14% stake.
To this day, unlike the founders of Uber and WeWork, Tan remains in charge. His co-founder, Hooi Ling, is stepping down from operating roles and as a director at Grab by the end of this year.
US$16 Billion Accumulated Losses - And while many tech stocks have stumbled, some as much or more than Grab, Uber’s shares are down far less. Uber finally reported an operating profit in the second quarter. At the end of last year, Grab had accumulated losses of US$16 billion.
Uber had an easier road back. It can rely on its home market, the largest economy in the world. Singapore, while wealthy, is too small to support fast-growing consumer companies; some of Grab’s other Southeast Asian markets are difficult places to earn a profit quickly. And each market has its own languages, customs and regulations, making it a challenge to grow.
Bounce Back - Grab is trying to bounce back. The company scaled down its super-app strategy, though it still offers payments and other digital banking services, along with rides and deliveries.
Grab remains a substantial business with about 35 million monthly users. Operating in eight countries and more than 500 cities, it posted revenue of US$1.4 billion last year, and its market value is more than US$13 billion. It’s a household name in the region; its logo—“Grab,” often written with two green lines that curve like a roadway—is a familiar sight from Bangkok to Borneo.
One day in August, Grab’s stock jumped 11% after it posted a narrower quarterly loss. Grab points to strong revenue growth and six consecutive quarters of improvement in its favoured measure of profit, which excludes interest payments, taxes and certain noncash items.
No comments:
Post a Comment