Despite a record-breaking debut on the Nasdaq, the Grab super app stocks dropped into a slump and have not shown much sign of breaking out of it yet. However, JP Morgan has released a report that forecasts it will happen in the next year.
If so, what does this mean for Grab and other Southeast Asia tech startups?
Who is Grab?
Founded in 2012 as a ride-hailing service in Malaysia before moving its headquarters to Singapore, Grab is the largest startup in Southeast Asia. Over the years, it has grown to become a giant across many different industries.
Here’s everything you need to know about the Grab Nasdaq debut and its impact on the Southeast Asian tech startup ecosystem
From food delivery to courier services, insurance and digital payments, Grab’s expansion from a mere taxi app and its growth across the region in the past decade has been astronomical. It now operates across eight different countries and 465 cities across Southeast Asia and has become a ‘super app’ with a user count of over 670 million.
Their growth has been an inspiration to many other startups coming out of the region, and they have led the way in floating on the New York Stock Exchange.
What has caused the stock price slump?
Thanks to a backdoor listing, Grab made its market debut on December 2nd of 2021. The flotation came about due to a $40 billion USD merger with Altimeter Growth Corp, a special purpose acquisition company (SPAC). The deal broke previous records and turned a lot of heads towards the company and its future. Unfortunately, its first day on the NASDAQ did not go as well as some had hoped, seeing them down 21% by the end of the first day, closing at $8.75 USD per share.
It’s entirely possible that investors sold their stocks immediately, hoping to make some quick cash. Or that some investors simply lost faith in the company’s future, which is highly likely since its third quarter of 2021 saw Grab making a loss of $988 million USD. This certainly was not a great signal to investors right before the company went public, and the price of stocks dropped dramatically from a 19% premium down to a 21% loss.
Of course, the laws of supply and demand are also in effect, and there are a vast number of stocks available in Grab and where there is low demand, the cost will drop as well. It’s certainly possible that the low closing price is due to Grab’s decision to go public in the American market as opposed to the Southeast Asian market, a move that definitely raised a few eyebrows. Grab themselves have stated they chose to go public in the US to tap into the much larger investor base, and things could turn around soon if investors decide to buy stocks in Grab after reading this JP Morgan report.
What does the JP Morgan report say?
Despite its disconcerting debut, JP Morgan has given Grab’s stocks an overweight rating as well as a price target of $12.50 USD. They believe the value will continue to grow throughout 2022 and reach their target price by year’s end. But what is the reasoning behind this?
As stated earlier, Grab is a ‘super app’ that has entered fintech, food delivery, ride-hailing and a myriad of other spaces. On top of this, they recently secured digital banking licenses in both Singapore and Malaysia. JP Morgan has also said that because of Grab’s sizable regional net, they can hold onto customers for a significant period of time, approximately one year.
This number is still climbing and, coupled with its expanding range of services, signals promise in the company’s future.
What lies ahead for Grab?
The future for Grab in Southeast Asia still looks bright. Thanks to the acquisitions of digital banking licenses, and with its Singaporean digital bank aiming to launch early next year, it has the potential to bring in a large fintech consumer base. Its most significant concern is competitor GoTo, a super app operating out of Indonesia. GoTo offers a large number of similar services in the same region as Grab. However, in this case, a little friendly competition couldn’t hurt. With many successful startups and large corporations, competition helps to drive growth and often gives the company the push it needs to supercharge innovation and stay ahead.
As Grab tries to continue its growth across the region, it will undoubtedly be looking to outdo GoTo and any similar companies that may emerge. If they can consistently grow, and JP Morgan’s forecast is proven correct, then not only the Grab super app but all Southeast Asia tech startups will see renewed interest from SPACs and investors in the USA hoping to repeat Grab’s success.