Singapore-headquartered super app Grab's plans to go public in the United States (US), in what is the largest blank cheque company deal ever, is testament to the growth prospects of Southeast Asia and Singapore's start-up ecosystem, analysts and industry players said.
Grab, which started out as MyTeksi to address the safety concerns of taxi commuters in Kuala Lumpur, announced on Tuesday (13 April) its agreement with Altimeter Growth, a special purpose acquisition company (SPAC) backed by Altimeter Capital, which will see the combined entity valued at around US$39.6 billion.
Rajive Keshup, Investment Director at Cathay Innovation, said the deal spotlights the Southeast Asia ecosystem – a market not driven primarily by capital or stimulus bubbles, but by economic fundamentals, such as the growth of the middle class, consumption and discretionary spending.
Chua Kee Lock, Chief Executive of Vertex Holdings and Managing Partner of Vertex Ventures Southeast Asia and India, said Grab's listing sends an important signal to investors and confirms the region's potential as a viable and attractive market capable of supporting global-scale winners.
"Many global investors were concerned that the Southeast Asia market lacks a track record of generating outsized exits compared with other markets," he noted.
Vertex was Grab's first institutional investor and supported the firm in its move from Malaysia to Singapore.
Other tech unicorns in the region, such as Traveloka, are also considering listing through blank cheque companies, riding the current SPAC boom – more than 550 SPACs have filed to go public on US exchanges in the year to date, looking to raise a combined US$162 billion, according to Bloomberg.
Keshup added that assuming successful outcomes for some of the first Southeast Asian SPAC outings, the listing vehicle could get leveraged more frequently as a potential alternative to late-stage growth funding or the traditional initial public offering process.
Experts said Grab's public listing will mean that it has greater access to funding, with the ability to raise more capital via bonds or debt to finance its growth, on top of stock issuance.
DBS Group Research analyst Sachin Mittal noted that its additional funding could be channelled to the likes of Grab's food delivery business, which is not yet profitable.
The additional capital could also support the growth of its fintech services, which will take time to scale across the region and would entail high customer acquisition costs, he added.
Vertex's Chua also noted: "By raising more capital, this would also contribute to Grab's digital bank offering, which is a natural extension of Grab Financial Group."
Grab's consortium with Singtel was awarded a digital full bank licence in 2020, which will allow it to provide retail and corporate customer services such as opening accounts and deposits.
This article was first featured on 14 April, 2021 in The Straits Times.