Grab, the most valuable start-up in Southeast Asia, postponed its initial public offering (IPO) of 54 billion Singapore dollars (40 billion US dollars) through a merger of special-purpose acquisition companies until the fourth quarter of this year.
The company had previously said was aiming to close the deal in July of this year. Delay is over required details by the U.S. Securities and Exchange Commission Grab is completing its financial audit for 2018 through 2020 and is working with the SEC for pre-approval of accounting policies and financial disclosures.
Grab’s valuation is the largest yet in the Spac space, and the rideshare giant could raise around S $ 6 billion (US $ 4.5 billion) in cash proceeds.
Anthony Tan, CEO of Grab Holdings I had said that you are sure The merger of the food delivery and transportation services giant and an American blank check company will be completed by the end of the year.
Some observers and investors have expressed concern about the delay, as the madness of space it can cool down in a matter of months.
However, experts say that investors’ appetite will not diminish and that the Spac deals will continue.
After the completion of the Grab’s Spac deal, the combined entity’s shares will trade on the Nasdaq under the ticker GRAB.
Spac Cool Down paves the way for more serious investors
Golden Gate Ventures Partner Michael Lints commented: “The Spac craze has definitely slowed, but it has not completely disappeared… With the craze waning, you will find more long-term and strategic investors not looking for a quick profit. This will play in favor of the (Grab) deal. “
Recently, the performance of SPACs has wavered in the market, putting additional pressure on blank check companies trying to woo startups that are getting wary of the IPO process.
US regulators have been warning investors for months about the potential risks around spaces. This year, they spooked negotiators by floating the potential for a different accounting treatment for one aspect of the Spac deals, a move that has forced many companies to review their results.
The heightened scrutiny It comes in the midst of a global IPO boom. The companies raised about $ 130 billion in the United States this year through June, of which $ 88.2 billion was SPAC deals, according to Refinitiv data.
“Clearly, Spacs as a vehicle is here to stay. Long-term investors tend to spend more time understanding risks, but they also see value in companies like Grab, ”said Michael.
A Spac is a shell company that raises funds to acquire a private company for the purpose of going public, allowing such targets to bypass a traditional initial public offering.
Grab’s Spac delay will be a boon for the tech company
Rumors about the Grab Spac IPO had been downplayed by the market recently, said Ashley Huo, an analyst at DailyFX.
But he calculated that sentiment for stocks would remain roughly the same as in the first quarter of 2021, when they hit a record advance of just a quarter.
This is due to the food delivery segment, which grew 49 percent in the first quarter and helped offset a decline in private travel. The financial services segment expanded 17 percent in the same period. The company did not provide revenue or earnings figures.
Experts say the delay will give the tech company more time to work on showing this year’s results as well, to gain the trust of more investors.
“Your effort to achieve decent growth in this challenging period can be a compelling fact for your appeal for the foreseeable future … Grab made a great merchandise value of S $ 4.8 billion (US $ 3.6 billion) in the first quarter of this year, which was a growth of 5.2 percent compared to the first quarter of the previous year, “said Ashley.
SEA listings new to the US market, show growth potential
Investors will view this deal from an opportunity perspective, Michael said.
That’s because Southeast Asian tech companies are relatively new to US public markets, he said.
“Other than SEA Group, there have been no big listings in the US from Southeast Asia,” added Michael. Through Grab, public investors can understand how big the opportunity is in the region and how much more the technology company can grow on new and existing product lines, he said.
Spacs typically have 24 months to find a target. If the company doesn’t identify one, it liquidates and the investors get their money back.
Investors who buy and fund Spacs when they first go public are typically institutions such as hedge funds.
Despite a bleak global economic outlook and a general slowdown in 2020, the Asian Development Bank and the International Monetary Fund have projected a rebound for Southeast Asian economies for this year.
According to the InfoComm Southeast Asia platform, the region is a bright spot It will continue to shine for companies seeking new markets and growth opportunities in tough times.
That’s due to the rapid growth of the region’s middle class, which doubled in size in 2020 compared to 2012. Against a backdrop of growing consumption, Covid-19 has also accelerated interest in digitization and technology in Southeast Asia. , and a demand for digital innovations and applications.
The economic recovery is a “wild card” to influence investor appetite
The US Federal Reserve (Fed) raised your expectations for inflation this year and said it will raise interest rates.
This has affected the equity markets because loans can be costly for individuals and businesses. Higher interest rates also tend to negatively affect earnings and stock prices for most sectors.
Ashley believes that the tighter interest rates may not affect investor confidence in the Grab SPAC deal.
“The Fed is expected to start downsizing in 2022. Unless the Fed takes further steps to accelerate progress, it may not have a significant impact on the Grab SPAC deal,” said Ashley Huo, analyst at DailyFX.
But Michael has a more cautious view.
“Interest increases always impact public markets and public investors’ sentiments. It’s hard to disconnect a big price from public investor sentiment, ”he said.
“It is difficult to say how it will affect because we are still a few months away from launch at the end of this year. The listings could reconsider the valuation if the market is more cautious and conservative due to the increase in interest rates, ”added Michael.
Grab is a key content pillar for Vulcan Post. You can find the rest of our Grab coverage here.
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