Grab Holdings Inc., the operator of the most popular ride-hailing app in Southeast Asia, today announced plans to list on the Nasdaq stock exchange via a special-purpose acquisition company merger.

The transaction is expected to give Singapore-based Grab an initial pro-forma equity value of $39.6 billion, which will reportedly make the deal the biggest SPAC merger in history. The amount of capital the company expects to raise is noteworthy as well: Grab anticipates up to $4.5 billion in cash proceeds. 

SPAC mergers are an alternative to traditional initial public offerings for firms seeking to list their shares. In such transactions, the firm headed to the stock market merges with a SPAC that is already publicly traded. Listing this way offers several benefits, including the fact that SPAC mergers are often several months faster than a traditional IPO.

SPAC mergers have surged in popularity over recent quarters thanks partly to strong interest from the tech industry. According to Reuters, the amount of funding raised through such transactions has already reached $99 billion in the U.S. this year, more than the $83 billion raised during all of 2020.

The special-purpose acquisition company merging with Grab to help it go public is called Altimeter Growth Corp. and has the backing of Altimeter Capital Management, a prominent technology investment firm. More than a half-dozen other investors, including BlackRock, the world’s largest asset manager, will also contribute to the expected $4.5 billion the company will raise.

Grab’s ride-hailing app is the most popular in Southeast Asia with a market presence that spans more than 400 cities across eight countries. The company has used its strong position in the on-demand transportation market to expand into food delivery and mobile payments, where it’s also a category leader. Grab argues that by providing multiple different services through its app, it can provide more value to consumers while lowering the cost of delivering those services.

Grab’s “superapp” approach, as the company describes its product model, is proving popular with consumers. The percentage of Grab users who use two or more services has increased fivefold over the last 24 months. 

The company’s strategy enabled it to more than double the gross merchandise value processed through its app between 2018 and 2020, to more than $12 billion. From that customer activity, Grab generated adjusted net revenue of $1.6 billion last year, a figure the company expects to reach $4.5 billion in 2023. That’s the same year Grab is aiming to achieve positive earnings before interest, taxes, depreciation and amortization. 

An equally important data point is the anticipated increase in the company’s total addressable market, which it believes will balloon from $52 billion last year to more than $180 billion by 2025. Southeast Asia has a population of about 670 million people and a rapidly growing digital economy, but use of ride-hailing and food delivery apps is relatively limited. Grab and its SPAC investors are making the case that this combination of factors is creating significant revenue opportunities.

Grab’s SPAC merger with Altimeter Growth is expected to close in the coming months subject to shareholder approvals and customary closing conditions.

Photo: Grab