The Grab SPAC deal has been the talk of the tech industry in recent weeks. Grab is a leading app with hyperlocal services designed to meet people’s delivery, mobility, and financial needs. Despite its giant profile, you would be surprised to learn that Grab began as a grassroots organisation as it entered the Southeast Asian tech startup ecosystem. Since its inception, it has been a driving force behind the region’s economic growth as one of the most successful Southeast Asia unicorns, with community welfare at the core of its mission.
A special-purpose acquisition company (SPAC) is a shell corporation also known as a “blank cheque company.” A SPAC listing bypasses the traditional IPO process and is a quicker way of becoming a public company. Grab postponed its $40 billion USD initial public offering (IPO) via its SPAC merger with Altimeter Growth Corp due to details required by the US Securities and Exchange Commission (SEC). The Grab IPO deal, which will be the biggest SPAC valuation to date with up to $4.5 billion USD in cash proceeds, is set to go ahead after reviewing Grab’s financial audit.
What does this merger mean for Southeast Asia?
The merger will mean that the Singapore tech company Grab will become a US-listed public company, allowing it to trade on the Nasdaq stock market. Grab will replace Altimeter Growth Corp on an exchange and trade under a new stock ticker. The Silicon Valley-based company is bound to attract some attention to Grab with their merger. This opens up a huge market that Southeast Asia hasn’t yet been a major player in before now.
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Grab’s IPO would be massive, not only for the company but for the whole of Southeast Asia. As we have seen in past years with countries like Japan and China and their technology booms, the tech sector provides a higher skill level to those working within it. Moreover, the shifting demands in labour from routine, practical, lower-level skills to more sophisticated and analytical skills required for technology means education and training will also grow.
Grab’s funding should cause a trickle-down effect creating more growth at the top and, subsequently, more jobs and training. This then creates higher-paid positions resulting in more money being pumped back into the country, allowing Southeast Asia’s economy to grow and bridge the gap between the richest and poorest communities in the world.
The COVID-19 effect
Despite 2020 causing a substantial global economic slowdown due to the pandemic bringing the economic activity to a near halt, the Asian Development Bank (ADB) and International Monetary Fund both predict a rapid rebound for the region’s economies for this year. According to the Asian Development Bank, Southeast Asia’s GDP is forecast to grow 4.4% in 2021 and 5.1% in 2022. However, the ADB says their economic prospects in 2021 and 2022 will be largely dictated by how the pandemic’s vaccination process unfolds.
Grab has reportedly recovered to a pre-pandemic level with a net revenue jump of about 70% year-on-year. Reuters reported that Grab Group’s third-quarter revenue had bounced back quickly, rising to more than 90% of the pre-pandemic level, with its food business responsible for more than 50% of the total revenue. With more people wanting to socially distance and protect themselves from COVID-19, Grab’s delivery and online services have also grown during the pandemic.
A new technological era for Southeast Asia
With Southeast Asia’s continuously growing tech market and Singapore placing first in the Global Expansion Teck Index 2020, investors worldwide are starting to sit up and take notice of the area’s potential. A study in 2019 by Google and Temasek showed that not only is Southeast Asia’s internet growing at an unprecedented rate, but also the number of users in the area has increased by more than 100 million. There is an immense likelihood that the region’s internet and tech economy is going to grow further. So, if the Grab merger takes place in the fourth quarter, it is likely that Southeast Asia will see another increase in its economy in the next few years.
The Grab SPAC deal is undoubtedly something to be excited about, especially for the Southeast Asian startup ecosystem. With COVID-19 causing a fluctuation in revenue, going through a SPAC merger provides Grab with a quicker and cheaper way of getting the company public and trading globally. Looking at the history of other technologically-developed countries, we can expect growth in Southeast Asia startups and the region’s GDP, paving the way for more high-growth businesses to emerge from ASEAN, benefiting not just the people at the top but also lower-income communities. The Grab IPO will surely have a major impact on both the region’s economy and residents.