It’s been several days since Grab Holdings (NASDAQ:GRAB) merged with Altimeter Growth in the largest special purpose acquisition company (SPAC) merger ever. The deal valued GRAB stock at almost $40 billion.
Unfortunately, the good times didn’t last. Opening trading on Dec. 2 at $13.06, as I write this, it’s trading below $8.
If you think GRAB stock will provide you with a fast score. Think again. The volatility on this one looks to be sky-high as we head into 2022.
I’ve never covered GRAB/AGC before. So, as I usually do, I’ll consider what’s readily observable about the Singapore-based tech disruptor.
GRAB Stock’s $4 Billion PIPE
Unlike the Trump Media and Technology Group’s (TMTG) impending merger with Digital World Acquisition (NASDAQ:DWAC), Grab and Altimeter didn’t have a problem revealing some of the investors involved in its $4 billion private investment in public equity (PIPE).
Big names that have thrown cash into Grab’s PIPE include BlackRock (NYSE:BLK), Morgan Stanley (NYSE:MS), T. Rowe Price (NASDAQ:TROW), Fidelity, and others.
It’s a strong group.
While I’m not certain size has anything to with the quality of a SPAC, the fact that Altimeter Capital, the sponsor of the SPAC, put $750 million into the PIPE suggests it’s more than prepared to put its money where its mouth is.
How much do you think the Trump family is putting into its $1 billion PIPE? My guess is somewhere between $0 and $0.
So, of the $4.5 billion in cash proceeds Grab got in the combination, Altimeter put up more than 17% of that total. That’s impressive.
Grab Is Definitely Still Growing
InvestorPlace’s Stavros Georgiadis recently discussed 10 things investors should know about the SPAC merger. First, its annual revenue growth is hard to miss. In the past three fiscal years, sales have grown from $46 million in 2018 to $1.2 billion in 2020.
That’s a compound annual growth rate of 411%. If it keeps up this pace, it will get to $10 billion in sales sometime in 2022.
Of course, as my colleague points out, investors need to temper their expectations. Grab’s third quarter 2021 revenues fell 9% year-over-year to $157 million. More importantly, it lost almost $1 billion, up from $366 million a year earlier.
It’s going to need all of that $4.5 billion in cash if its losses persist for long. Over the past three years, its generated cumulative losses of $9.2 billion. So the risk of it running out of cash in the next three years is a legitimate concern.
Perhaps, this more than anything, is why GRAB stock fell by 20% on its first day of trading.
The Way of the Future?
The superapp that Grab built was made for the go-go pace of Southeast Asia. More than 90% of Southeast Asians access the internet via their phones.
Grab got started as a ride-hailing app in Singapore in 2012. It now operates in eight Southeast Asia countries offering grocery delivery, travel bookings, insurance, lending, and other services all from one superapp.
It’s such a dominant force in those eight countries that Uber Technologies (NYSE:UBER) sold majority control of its Southeast Asia operations to Grab in 2018.
Denny Fish, portfolio manager and technology sector lead at Janus Henderson Investors said in an email to CNBC:
“Anthony, [Tan Hooi] Ling, and the rest of the talented management team at Grab have built a superapp across mobility, delivery, and financial services — together which has the potential to fuel the dramatically changing and growing digital economy in Southeast Asia.”
Fish added: “Given its purpose based mission, Grab is in a unique position to benefit from this historical shift.”
I don’t see why this kind of superapp couldn’t be successful in North America. Are we that much different than people living in Southeast Asia? While the losses are piling up, it’s hard not to wonder what Grab might become in five to ten years.
It could dwarf Uber should everything go as planned.
The Bottom Line on GRAB Stock
I started my research into Grab, thinking I would be put off by the losses it has generated in the past three years. But then I thought about how attractive a superapp is to my everyday needs.
One-stop shopping in a hectic world isn’t so bad.
Everyone today wants to decentralize. For this reason, Grab’s centralized ecosystem seems like an excellent contrarian play.
If you are a speculative investor and can afford to lose 100% of your bet, I would sell 100% of your ill-gotten gains from DWAC and throw it all into GRAB stock somewhere under $9. You can thank me later.
On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
