Although the diameter of Earth is approximately 7,926 miles (or 12,756 kilometers for the international audience), advanced technologies in air travel have made the planet appear surprisingly small. From the west coast, travelers can fly to Japan in about 11 hours — an unimaginable concept a century ago, given that it took Charles Lindbergh over 33 hours to complete his transatlantic flight.
Of course, the defined dimensions of the globe makes the world even smaller for investors. While financial analysts recommend their clients to mostly invest in U.S.-based blue-chip stocks, many have sought the higher risk but higher-reward potential of foreign equities. To be sure, those who staked their capital early in China’s booming economy accrued serious wealth. However, such large-scale opportunities only come around once every blue moon.
Yet with Grab Holdings Ltd, a comprehensive digital business services platform, prospective buyers may be on the cusp of a transformative prospect. In large part to the COVID-19 pandemic, Grab’s home region of Southeast Asia experienced a paradigm shift, benefitting from a wide integration of connectivity solutions.
Thanks to the company’s contributions in food delivery, mobility (i.e., ride sharing) and e-wallet services, Grab could catalyze the next regional evolution. But before participating in its initial public offering (IPO), you’ll want to recognize key risk factors.
When Is the Grab IPO Date?
With few regions that feature a robust mix of economic growth, rising internet penetration and an extremely favorable population pyramid, many investors look to the Southeast Asia market as the biggest emerging growth opportunity. Not surprisingly, interest in the Grab IPO has been nothing short of intense, with multiple mainstream media outlets covering its public market debut.
Shares will launch under Grab’s corporate identity on Dec. 2, following approval of a business combination with Altimeter Growth Corp. (NASDAQ: AGC). The ticker symbol for the equity unit will change to GRAB, while the listing exchange will remain the Nasdaq.
As you can surmise from the above, Altimeter Growth is a special purpose acquisition company (SPAC). Also known as a blank-check firm or shell company, a SPAC has no underlying operations. Instead, its duty is to initiate its own IPO, becoming an empty vessel of a public company. But by merging with a business enterprise, a SPAC can essentially IPO a private organization through the backdoor.
Naturally, this process presents a series of pros and cons, both for the executives involved in the deal as well as for the retail investor. On the plus column for individual buyers, SPACs open prospects that may otherwise not be available. Ungenerously but accurately, Bloomberg labeled these shell companies as the poor man’s private equity funds.
Still, to loosely paraphrase a much-cited idiom, one man’s trash is another man’s SPAC. In other words, IPOs via reverse mergers have carried plenty of hype over the trailing year, presenting the allure of riches. But in too many cases, the effect was illusory, with subsequent business combinations leading to conspicuous underperformance against benchmark indices. Much of the disappointment ties in with the inherent structure of SPACs, such as the dilutive impact of exercising warrants.
Nevertheless, it’s important to judge GRAB stock by its own merits — not just what happens with related IPOs. As Benzinga staff writer Phil Hall pointed out, Grab’s transaction represents the biggest SPAC deal ever. Thus, plenty of eyeballs are staring at this debut, not only for the immediate profitability potential but also as a possible forward indicator for SPAC-based IPOs.
Further, the company Grab dethroned from the top spot was Lucid Group Inc. (NASDAQ: LCID), the surging electric vehicle manufacturer that’s going head-to-head with sector leader Tesla Inc. (NASDAQ: TSLA).
Grab Financial History
Prior to dissecting the financial details of Grab, it’s important to recognize the sheer volume of this IPO’s total addressable market. Depending on which source you choose from, the population of Southeast Asia ranges from 600 million to nearly 678 million people. Better yet, as alluded to earlier, the demographic tilts heavily toward the younger end of the spectrum.
Among other factors, countries in the area will face fewer elderly care liabilities and a growing ability to replenish retiring generations. Therefore, it’s conceivable that as long as Grab continues operating, its equity unit can become a lifetime investment.
Still, people without infrastructure don’t make for an effective combination. But that’s why investors have circled this date on the IPO calendar. Southeast Asia doesn’t just boast superior demographic dynamics, it also offers compelling fundamental drivers. Primarily, the rapid rate of digital and connectivity integrations leads forecasters to believe that the region’s internet economy could reach $1 trillion by 2030.
In the nearer term, a Bloomberg report notes that this lucrative economic segment could command a valuation of $363 billion by 2025, double from where it is now. For GRAB stock specifically, the underlying company enjoys relevance in 3 key areas of concentration:
- Food delivery: During the early months of the COVID-19 pandemic, Americans depended greatly on online services such as food deliveries. Turns out, the Southeast Asian region was no different, with food deliveries in the area soaring 183% from 2019 to 2020. Further, a joint report by Grab and Euromonitor International predicted that the region could reach $28 billion in food delivery-related transactions by 2025.
- Mobility: Thanks to exploding internet penetration rates in Southeast Asia — the highest in the world per Statista.com — more consumers in the region are using digitalized services to handle their day-to-day needs. Therefore, ride-sharing services will likely enjoy burgeoning demand, particularly as the middle class expands.
- E-wallet: Thanks to a delectable combo of vast population size and a leading technology infrastructure, the Asian continent will likely dominate the e-wallets space globally. Moreover, Southeast Asia will feature the fastest growing mobile wallet market, potentially putting GRAB stock in the driver’s seat.
Sure enough, Grab benefits from skyrocketing growth, with revenue of $396 million in the half year ending June 30, 2021, representing a 5-fold year-over-year increase. However, in the quarter ending Sept. 30, the company posted a net loss of $988 million, comparing unfavorably to a loss of $621 million 1 year ago.
Without question, GRAB stock enjoys significant upside potential because of the underlying business and the almost-perfect timing as the Southeast Asian backdrop is one of the world’s most lucrative markets.
Over the next few months, Grab appears poised to ride positively tilted growth metrics. For instance, in 2020, the company generated top-line sales of $469 million. At $553 million in the first 3 quarters of this year, it’s already on pace for a blistering annual performance. Thus, the fourth quarter is basically a bonus round.
Still, prospective buyers shouldn’t ignore that under the SPAC ticker AGC, Grab’s market value plummeted over 20% during the trailing week leading up to the IPO day. When an equity unit drops double-digit percentages in a short time frame, there’s a reason for it — and typically, it’s not a good one.
Ultimately, investors will have to determine whether the ecosystem for GRAB stock can sustain a long-term rally. Yes, Southeast Asia’s burgeoning internet economy is a massive tailwind. But on the other hand, widening inequalities in the area imply inefficiencies on a per-capita basis.
How to Buy Grab IPO (GRAB) Stock
With GRAB set to launch under its own brand name, interested investors must buy at the open, an easy process if you know how to buy stocks. If not, just follow the steps below.
Step 1: Pick a brokerage.
Contemporary brokerages feature similar incentives to join, meaning that you can narrow your list of best brokers to platforms that cater to your needs.
Step 2: Decide how many shares you want.
IPOs are naturally risky and doubly so for SPAC-based business combinations. Therefore, engage the offering with a balanced share count.
Step 3: Choose your order type.
Before trading, learn these market concepts.
- Bid: The buyer’s best offer for a stock.
- Ask: The seller’s lowest acceptable price.
- Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
- Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
- Market order: Market orders guarantee fulfillment but only at the current rate.
- Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
- Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.
Step 4: Execute your trade.
Follow these steps to execute a market order:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
GRAB Restrictions for Retail Investors
Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.
Since the debut is here, you cannot acquire GRAB at its pre-IPO (initial offering) price. However, for upcoming traditional IPOs, you can open an account with platforms like SoFi Invest, which offer pre-IPO access for certain enterprises.
GRAB the IPO by the Horns?
As the biggest SPAC-based IPO, GRAB stock inherently attracts attention, but it’s not the only reason to consider the opportunity, with a lucrative Southeast Asian economy enticing investors. Still, shell companies haven’t performed well and emerging markets aren’t without risks.