Altimeter (NASDAQ:AGC) is a special purpose acquisition company (SPAC), which means that it is a company that does not have significant operations and only exists to effect a merger or a business combination with another business entity. This U.S. blank-check company announced a merger with Singapore-based ride-hailing and food-delivery company Grab back in April. Altimeter shareholders finally approved the deal on Nov. 30, and Grab is set to start trading under the GRAB ticker on Dec. 2. Let’s take a look at some things you need to know about AGC stock and Grab.
SPACs have been a hot topic in 2021 and over the course of the year, AGC stock has seen quite a lot of volatility. This has stemmed primarily from the enthusiasm upon the announcement of this Grab deal. Altimeter shares rallied to a 52-week high of $18.11, and as of Dec. 1, 2021, AGC stocks were trading at about $12.25.
A useful reminder here is that normally SPACs have a reference stock price of $10.
10 Important Things You Should Know About the Altimeter/Grab Deal
1. What is Grab?
According to Euromonitor: “Grab Holdings Inc is a leading super application operating across eight Southeast Asia countries and 500 cities as of March 2021. Its business lines include on-demand transportation, food and grocery delivery, logistics, and mobile financial services. Grab’s success can be attributed to its aggressive expansion across industries and countries, and product localisation.”
2. This makes Grab is a big company
In 2020 Grab reported gross merchandise volume (GMV) of $12.5 billion, adjusted net revenue of $1.6 billion, 1.9 billion transactions completed, and 25 million monthly transaction users (as of Dec. 2020).
3. And their market base is also huge
There is a large addressable Southeast Asia market opportunity, consisting of online food delivery, ride-hailing, and digital wallet markets. Grab expects its total addressable market to grow from about $52 billion in 2020 to more than $180 billion by the year 2025. Profitability is expected by 2023.
4. This is a massive merger
This business combination deal, valued at pro-forma equity of about $40 billion, is expected to be one of the largest-ever mergers with a blank-check company or SPAC.
5. Altimeter shareholders just approved the deal
Altimeter Growth Corp just announced that on Nov. 30: “AGC shareholders approved the previously announced business combination with Grab, Southeast Asia’s leading superapp, at an extraordinary meeting of shareholders today.”
6. There had been a delay
Initially, when the deal between Altimeter and Grab was announced in April 2021, the target for the closing of the deal was July 2021. However, Grab had to work on auditing its financial results for the past three years and postponed the closing of the deal to the fourth quarter of 2021.
7. Grab’s incredible value
The proposed transactions value Grab at an initial pro-forma equity value of approximately $39.6 billion at a PIPE size of more than $4 billion. Grab is expected to be getting about $4.5 billion in cash proceeds.
8. Altimeter is very committed to the SPAC deal
According to the Grab Investor presentation dated April 2021 there will be a three-year lock-up on sponsor promote shares showing Altimeter’s long term commitment.
9. Grab’s revenue
For 2018, 2019, and 2020 Grab reported net revenue of $46 million, $455 million, and $1,197 million respectively. Net losses for 2018, 2019, and 2020 were $2.5 billion, $4.0 billion and $2.7 billion respectively.
10. Its Q3 2021 earnings report showed mixed results. Primarily due to the pandemic.
Some of the highlights were:
- GMV reached a new quarterly record of $4.0 billion, up 32% year-over-year (“YoY”)
- Grab expects a strong recovery in mobility heading into Q4 2021
- Average spend per user on Grab’s platform grew 43% YoY to hit a record high
- Revenue was $157 million, down 9% YoY. primarily due to severe lockdowns in Vietnam
- Loss for the period grew by $366 million to $988 million. The YoY increase in losses during the third quarter was driven primarily by non-cash expenses.
However, Further Due Diligence Is Required for AGC Stock and Grab
Investors should analyze further the financial statements of Grab, as for now it is an interesting company with a large addressable market but is still unprofitable. Grab says it is “Southeast Asia’s leading superapp.” So, in the following quarters, this “supearpp” needs to do more than just provide a positive social impact in Southeast Asia, a strategic goal of the company, but also deliver a strong financial performance for shareholders.
On the date of publication, Stavros Georgiadis, CFA 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 InvestorPlace.com Publishing Guidelines.
Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.