Altimeter Growth Corp Is a SPAC That’s Acquiring a Dog of a Company

Altimeter Growth Corp (NASDAQ:AGC) stock represents a special purpose acquisition company (SPAC).

A 3D illustration of the word SPACs on a stock board full of numbers and up and down arrows.
Source: iQoncept/

It intends to merge with Grab, which is a delivery company and styles itself as a so-called superapp.

The company hopes to complete the merger by year-end, in which case AGC stock will convert into shares of Grab.

Traders have gotten excited about AGC stock lately. The SPAC, which had been trading right around the $10 mark, leapt to $17 recently. However, AGC stock has started to pull back after what can only be labeled a dismal earnings report last week. It trades today at a little more than $14. So should investors be looking to buy as shares dip, here? Not so fast.

Grab: Superapp Plans Hit a Setback

Grab is aiming to become the leading ride-sharing and delivery company and also provide other products such as financial services in Southeast Asian economies such as Indonesia, Malaysia, and Vietnam.

On the surface, this sounds exciting. Uber (NYSE:UBER) certainly has drawn substantial investor interest, even if the stock hasn’t been a home run quite yet. Still, the possibility of being the Uber of a certain region holds appeal.

When you look at Grab’s numbers, however, it’s far from clear that the company has built much real brand affinity. In its Q3 results published Nov. 11, Grab issued some startling numbers.

For the quarter, revenues dropped 9% year-over-year, slumping to $157 million. The company blamed heightened lockdowns in some economies such as Vietnam for the revenue decline.

That seems somewhat questionable, however, as these results were up against the same quarter from 2020, when the pandemic was causing widespread chaos in most markets globally. Besides, during a heightened lockdown period, other Grab features such as food delivery should pick up some slack.

Grab’s Troubling Earnings and AGC Stock

The company’s revenue decline looks even more concerning in light of some other factors.

Grab’s gross merchandise value (GMV) rose 32% to a new quarterly record of $4.0 billion. Average user spend on the platform surged 43%, and the GMV for deliveries specifically increased 63%.

With all those big growth numbers, you’d surely think revenues would be up too. Instead, they dipped rather dramatically. This implies that Grab is seeing lower-margin activity account for a larger portion of its total business mix.

It is handling more products, clearly, based on GMV, yet less of it is turning into revenue for the company itself.

Turning to net income, the company lost a stunning $988 million in Q3 alone. That was sharply worse than the previous $622 million loss.

Again for context, Grab only generated $157 million in revenues last quarter, yet it managed to lose nearly a billion dollars. This is incredible stuff. Bulls will point out that a large portion of the loss was related to non-cash factors. That does dull the blow to some degree, still, investors are right to be nervous.

Looking at adjusted EBITDA, for example, the company lost $212 million for the quarter. That was a much steeper loss than the negative $128 million figure for the firm in same quarter of 2020. There’s no getting around it, the company is incinerating shareholder capital right now.

Does Grab Have a Sustainable Business Model?

Perhaps the most stunning figures come when you look at the company’s expenses in particular. What is Grab spending so much money on that is racking up these big losses?

In large part, the losses are in incentives to drivers and customers. Last quarter, Grab spent $187 million on partner incentives.

It spent even more ($271 million) on consumer incentives. Despite giving out more than $400 million in bonuses and discounts, it generated just $157 million in revenue. Needless to say, if you have to give out $3 of bonuses and discounts to get $1 of sales, there might be something wrong with your underlying business strategy.

Grab can blame the ongoing effects of the pandemic for some of this. There is validity there. However, it’s hard to sugarcoat just how egregious these results are. It’s really hard to know if there is much actual demand for Grab at all, or people are just using it because the company is giving out a deluge of incentives to app users.

AGC Stock Verdict

In the short run, AGC stock might rebound once again. There is a definite buzz around the company on social media ahead of its SPAC demerger.

In the longer term, however, Grab is generating some of the most rotten financials I’ve run across in quite a while.

It’s also worth noting that even UBER stock has underperformed other tech stocks dramatically; UBER is essentially flat since its IPO, and Uber looks to be much closer to having a sustainable business model than Grab.

Perhaps Grab can turn things around once the pandemic’s impact on the business recedes. Right now, though, for investors, Grab looks like a disaster waiting to happen.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

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