Sources familiar with the matter told Reuters that ride-hailing and food delivery giant Grab said that it is exploring a listing in the United States this year.
According to one of the sources, the Initial Public Offering (IPO) could raise at least US$2 billion (S$2.66 billion).
This means that it is likely to be the largest overseas share offering made by a Southeast Asian company.
The sources, who declined to be named, also added that the plans are not finalised, and will be dependent on market conditions.
Singapore-based Grab is currently the region’s most valuable start-up worth more than US$16 billion (S$21.31 billion).
Grab currently operates in eight countries — Singapore, Cambodia, Indonesia, Malaysia, Myanmar, Thailand, Vietnam and the Philippines.
Its services are present in more than 500 cities and towns in the Southeast Asian region.
What An IPO Means For Grab
Back in 2019, Grab CEO Anthony Tan told CNBC that it would only go public when its entire business is profitable.
Currently, only its ride-hailing business is breaking even in all the markets it is present in.
However, Grab is reported to pay up to US$2.2 billion (S$2.93 billion) to Uber if it does not go public by March 25, 2023.
According to Uber’s IPO prospectus, Uber has the option to exercise a redemption right to “put all or a portion of its investment back to Grab any time after the redemption date … for cash,”
A redemption right lets investors make the company repurchase their shares after a certain period of time.
This could be a reason for Grab’s decision to go public this year.
Despite that, an IPO is likely to be beneficial to Grab’s future growth, as it can use the cash to further the business, in the form of expansion into new markets or verticals.
Furthermore, a key motivator for some companies that go the IPO route is the prestige of being listed on a major stock exchange.
This is especially so in Grab’s case, as they have chosen to list in the US instead of the Singapore exchange.
Chinese companies like Alibaba have also chosen to go public in the US rather than their home countries.
Other motives include more range of motion, which can simplify any future acquisitions of US businesses
Breaking Even And Seeing Growth Despite The Pandemic
Grab said that its ride-hailing business is breaking even in all the markets it is present in. It also expects to break even in food delivery by end 2021.
“We expect our food delivery business to achieve breakeven by the end of 2021, after having recorded positive EBITDA in several countries in Q2 2020,” said Grab president Ming-Maa.
Additionally, Grab has successfully hit its growth and profitability targets.
It has reduced EBITDA spend by approximately 80 per cent over the last year and achieved segment breakeven for ride-hailing in all operating markets, including Indonesia, which is home to its biggest rival Gojek.
The company also offers financial services, and its consortium with Singtel was awarded a digital full bank licence by the Monetary Authority of Singapore.
Grab’s Merger With GoJek
Last month, it was reported that there has been “progress” on Grab-Gojek merger talks.
However, all discussions have came to an impasse after both parties failed to agree on certain issues pertaining to control over the combined Grab-Gojek entity.
Bloomberg later reported on 5 January that Gojek is in advanced merger talk with Tokopedia, which is one of the largest e-commerce sites in Indonesia.
According to the report, the merger may conclude in the upcoming months. The combined entity plans to be listed in the United States and Indonesia.
Thus, it is likely that Grab’s IPO plans will come after the merger with Gojek has been dropped. The company declined comment on the potential IPO.
The market is good and the business is doing better than before. This should work well for public markets.Sources familiar with the Grab IPO in a Reuters report
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