The Southeast Asia tech ecosystem was shaken up when a trustworthy source discussed a potential Carousell merger with a special purpose acquisition company (SPAC).
Founded in 2012, Carousell operates in eight markets across Southeast Asia, Taiwan and Hong Kong, making it one of the largest and fastest-growing marketplaces in the region. The startup was previously backed by prominent companies like Rakuten Ventures, Naspers, and Sequoia Capital India. Carousell’s merger with Telenor Group’s 701Search and backing by South Korea’s Naver also bumped its value to $900 million USD.
The Carousell SPAC deal could potentially bring the value of the company to $1.5 billion USD. With such a high valuation, the multinational online classifieds platform is likely to grow larger and faster than ever, bringing it closer to the much-coveted unicorn status in Southeast Asia.
Singapore’s startups have been doing well despite the pandemic
Following this trend, other startups are looking to go public via the SPAC route, including Singapore’s Grab Holdings and Malaysia’s online used-car platform Carsome. Indonesia-based travel ticketing platforms Traveloka and Tiket.com are also considering a similar path.
The Carousell US listing is in the preliminary stages, which means many discussions are still ongoing, and details could change at any minute. However, people close to the matter revealed that the process could occur by the end of the year with the help of an advisor.
Potential pitfalls for the Carousell US listing
As consumption habits shifted to eCommerce during the pandemic, over eight million listings have been created on Carousell, with millions of items successfully processed.
However, the platform is also a host to a record number of digital scams. According to the Singapore 2020 Crime and Safety report, Carousell is the top platform used for eCommerce scams, encompassing 39.3% of total digital fraud committed. However, it’s worth noting that Carousell is taking active steps to punish offenders and tighten the security of its platform.
This is only one of the potential pitfalls in the US listing since the company is not profitable yet. The online marketplace suffered a net loss of $39.4 million USD in the 2019 fiscal year compared to the $25 million USD loss from the previous year. With a plan to exit by 2024, the founders indicated their primary concern is to make the firm profitable and take into account the investors’ concerns.
2021 will be an energetic year for IPOs
A SPAC is a blank-cheque company designed to take private companies public without going through the traditional initial public offering (IPO) process. By merging with or being acquired by a publicly traded SPAC, an operating company can become a listed company without executing its own IPO.
Herston Powers, a managing partner at 1982 Ventures, pointed out that the rising popularity of SPACs could help unicorns in the region that didn’t list in the past due to the lack of institutional coverage. He also predicts that listing activities in Southeast Asia will be highly active with a combination of conventional IPOs as well as US public debuts via SPACs.
Although SPACs are not a new invention, their sudden popularity in 2020 primed the market for Southeast Asian tech startups to list publicly without bearing the long lead time and cost of the conventional IPO route. This is a popular model for achieving public listing and raising capital for Southeast Asian tech startups as it is much faster than the usual IPO route.
The record-breaking SPAC merger with Grab Holdings put the ‘super app’ developer on the map. It sparked a chain reaction among a dozen tech startups in the region to become more interested in the following suit to go public in the US. As a result, Southeast Asia has become a hunting ground for unicorns with the potential to create more significant and groundbreaking deals.
SPACs also spotlight high-performing tech startups in Southeast Asia, helping to generate interest and capital from potential investors who might have overlooked the region. Despite the pandemic, the Asia-Pacific SPACs have raised a total of $2.4 billion USD, a whopping $1.787 billion increase from 2019.
Although it is still in the preliminary stages, the Carousell SPAC deal proves the startup is looking likely to join the ranks of tech titans planning to enter the US market by the end of this year. This merger signifies that tech startups in Southeast Asia are starting to pursue SPAC deals as a viable route to list in the US market, thanks to the Carousell US listing. The region is also becoming a popular hunting ground for US-based SPACs, which might indicate a maturing startup ecosystem.