Grab to delay its SPAC merger until fourth quarter, stretching the IPO horizon by Southeast Asia’s largest technology unicorn

·4-min read

Grab Holdings, Southeast Asia’s most valuable technology unicorn, plans to delay the closing of its merger with a US-listed special purpose acquisition company (SPAC) until the fourth quarter.

The Singapore-based ride hailing and food delivery giant said it was finalising its financial audits for the 2018, 2019 and 2020 financial years, and was awaiting pre-clearance from the US Securities and Exchange Commission (SEC) regarding certain accounting policies, according to a US regulatory filing on Wednesday. In addition to ride-hailing and food delivery, the superapp provides digital payments and financial services on its platform.

As a result, the company said it expects to complete its merger with Altimeter Growth, an investment vehicle backed by Silicon Valley’s Altimeter Capital Management, in the fourth quarter and go public with a listing on the Nasdaq stock exchange thereafter. When the deal was first announced in April, Grab had said it expected the merger to close in the “coming months,” without specifics.

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The merger would value Grab at US$39.6 billion, making it the biggest-ever listing by a Southeast Asian technology company. It is the second-largest deal involving a SPAC after hedge-fund manager Bill Ackman’s SPAC reached an agreement in June to buy a 10 per cent stake in Universal Music Group that would value the music company at about US$42 billion.

SPACs, also dubbed blank-cheque companies, typically do not have an existing business. They are created purely as vehicles to attract investors, build up financial war chests and buy assets, usually unlisted companies, within a specified time limit.

They have been one of the hottest fundraising trends globally in the past year-and-a-half, raising an estimated US$94 billion in the first quarter. The trend slowed in recent months as questions arose about accounting for warrants associated with the investment vehicles, as well as concerns about the optimistic projections some target companies have made as they prepare to go public.

The aggregate war chest for acquisitions has grown to about US$102 billion, more than the US$81 billion in all of 2020 and US$14.7 billion in 2019, according to data provided by Refinitiv.

However, Asian investors and potential target companies in the region remain bullish on the investment vehicles.

Hong Kong billionaire Richard Li Tzar-kai is in the early stages of setting up his fourth SPAC after raising more than US$1 billion from three of these blank-cheque companies over eight months, according to people familiar with the matter.

Hong Kong billionaire Richard Li Tzar-kai. Photo: Getty Images
Hong Kong billionaire Richard Li Tzar-kai. Photo: Getty Images

GoTo Group, the company formed by the US$18 billion merger of Indonesian unicorns Gojek and Tokopedia, is exploring both a traditional listing in Indonesia and going public in the US, possibly through a SPAC.

In its filing, Grab also updated investors on its performance in the first quarter, saying its overall gross merchandise value – the total amount of sales via its platform – rose 5.2 per cent to US$3.6 billion.

The company previously projected its annual gross merchandise value to exceed US$34 billion in three years, after reaching US$12.5 billion last year.

A GrabBike driver and his passenger in Hanoi in 2019. Photo: EPA-EFE
A GrabBike driver and his passenger in Hanoi in 2019. Photo: EPA-EFE

“We continued to demonstrate resilience and strong top-line growth across our consolidated business in 1Q21, despite what has been a slow Covid-19 recovery across Southeast Asia, as compared to the first fiscal quarter of 2020,” the company said.

Grab’s first-quarter results were largely unaffected by the coronavirus pandemic, as most social distancing and movement restriction measures came into effect in Southeast Asia in the second quarter last year, the company said.

Gross merchandise value in its delivery business increased 49 per cent to US$1.7 billion in the quarter and rose 64 per cent in its ride-hailing segment from a year ago.

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