The ASEAN ride-hailing and food delivery company Grab is seeking a US listing, according to Bloomberg. The issue could raise US$2 billion. This would be one of the largest ASEAN listings in the US.
Grab is valued at US$16 billion according to the previous funding round. It has raised more than US$10 billion, with Grab's investors including SoftBank and Mitsubishi. The company has plans to enter digital banking in Singapore.
Grab's net revenue rose 70% yoy in 2020, and it has weathered the pandemic effectively. Despite its heavy losses, Grab has regularly raised cash, and now has holdings of US$3.2 billion. This cash hoard "will be sufficient to cover negative operating cash flow, capital spending at its transport and food delivery businesses and scheduled debt maturities over at least the next two-three years", according to Moody's.
Grab has said its ride-hailing business is breaking even in all its operating markets, including Indonesia, the biggest. It expects its food delivery business to break even by the end of 2021.
The IPO plans have emerged after merger talks with ride-hailing rival Gojek collapsed. Instead, Gojek and the Indonesian e-commerce player Tokopedia are pondering an US$18 billion merger. The merger would be a prelude for dual listings in Jakarta and the US, according to Reuters.
There are four key takeaways, in our view:
Special-purpose acquisition companies (SPACs) have been pursuing ASEAN tech opportunities. Both Grab and Tokopedia have been courted by Bridgetown Holdings, a SPAC backed by billionaires Richard Li and Peter Thiel. The rush to list may be a consequence of the SPAC courtship and the frothy valuation of EM tech listings such as Sea Limited and Jumia.
The Gojek-Tokopedia merger will be a game-changer for the ASEAN tech space, creating the platform for a dominant player along the lines of Alibaba in China and Amazon in the US.
The prospective Grab and Gojek-Tokopedia listings, represent a threat to Sea Ltd. Sea is a gaming company that intends to become an e-commerce giant. However, at this stage in its development, the gaming business is subsidising the e-commerce platform. ShopeePay, Sea's payment platform, has a smaller market share of the combined share of GoPay (Gojek’s payment arm) and Ovo (Grab’s payment arm in Indonesia). This means that Sea’s foray into payments will face serious competitive pressure. The merged entity would have better scale economics and a larger platform.
Assuming the merger between Gojek and Tokopedia takes place, Sea will no longer be the only game in town for ASEAN e-commerce listings. We think its strong share price performance and its current extravagant valuation can be attributed to its scarcity value.