Grab's mega-SPAC attack
Grab on Thursday hopes to become the king of SPACs, no matter how uneasy have been some heads to wear that crown.
Driving the news: Grab, a Singapore-based "super app" maker, today will list on the Nasdaq, via a reverse merger with a SPAC formed by Altimeter Capital. It gives Grab a pro forma equity value of $39.6 billion, the richest price ever afforded in such a transaction.
- Grab, which launched in 2012 as a ride-hail service before expanding into everything from delivery to investing, raised over $11 billion of private funding, including at a $15 billion valuation in late 2020.
- It's also raised dedicated capital for its financial services arm, but Grab president Ming Maa downplayed the possibility of a carveout, during a conversation earlier this morning.
Big picture: Many big SPACs mergers have struggled in 2021.
- Grab holds the top spot just ahead of the pending acquisition of MSP Recovery by Lionheart Acquisition Corporation II, which is trading below $10 per share.
- United Wholesale Mortgages, which was the largest-ever SPAC deal when first struck, is valued below its $16.1 billion merger price.
- UMW supplanted MultiPlan, whose post-merger travails we recently detailed.
- And then there was Bill Ackman raising the largest-ever SPAC, but then failing to buy a stake in Universal Music and getting sued.
- The shining exception is Lucid, the electric car company whose market cap closed yesterday in excess of $84 billion.
The bull case is that Grab is the sort of high-growth tech company that makes public markets swoon, as evidenced by SPAC unitholder redemptions of just 0.02%. Plus, super-apps are super sticky in places like Southeast Asia, in part because slower mobile broadband speeds discourage people from downloading multiple apps (or running them simultaneously).
- This SPAC also has key structural differences from others, in that sponsor Altimeter has locked up its shares for three years.
- "We wanted to align our lockup with the length of projections the company was putting forth," explains Altimeter partner Chris Conforti. "I hope that becomes a standard in the industry, and helps dampen some of the more unscrupulous parts of SPACs, where it's about getting quick cash."
- Altimeter also led the $4 billion PIPE with a $750 million commitment.
The bear case includes unprofitability, mega-SPAC track records and North American unfamiliarity with super apps. Plus, Grab is diving into a public pool roiled by Omicron.
The bottom line: The 10 largest SPAC mergers have all occurred since the beginning of 2020, so Grab may not be the record-holder for long.