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Is everything hunky-dory with a public listing via SPAC?


This phase is set for Grab’s public listing in Southeast Asia. The company is headquartered in Singapore there its partnership confirmation with Altimeter Growth Corp., a special purpose acquisition (SPAC) company, and plans to list its shares on NASDAQ at a valuation of $ 39.6 billion in the coming months.

The SPAC merger for Grab, which also includes private investments in public equity (PIPE) totaling in excess of $ 4 billion, is the largest U.S. equity offering by a Southeast company. ASIAN.

Experts believe this sets a record standard for ambitious unicorns native to Southeast Asia. It is also an important driving force for many startups in the region’s new digital economy, as listing through SPAC is opening a new path to liquidity and the public market. .

Without a doubt, this will inspire many tech unicorns in Southeast Asia to take the SPAC path for public listing.

However, is everything compelling with SPAC listing? Isn’t it a backdoor way to bring a company to the public with suspicious investors?

We have posed these questions to a few industry followers, mostly venture capitalists, in Southeast Asia.

Also read: Traveloka talks about merging with Peter Thiel’s SPAC to go public: Report

Here’s what they told us (the comments have been edited for clarity, style, and lack of space).

Carman Chan, Founder and Managing Partner of Click Ventures

Overall, a SPAC listing carries a higher risk but sometimes it can also generate a higher potential return if the company performs better than expected, similar to a late stage investment.

One of the main differences between SPAC and a traditional IPO is that the underlying revenue is used to value a company. In a traditional IPO, a company cannot use predictions to determine its value, while SPAC allows a company to use expected revenue to determine its value higher.

Therefore, the risk / reward is tied to the prediction compared to actual numbers. In addition, SPAC sponsors can often acquire ownership at a discounted price when SPAC makes an acquisition (this is known as D-SPAC).

Hence, they are encouraged to complete a deal instead of maximizing profits. This is a deviation for investors whose focus is on maximizing the internal rate of return (IRR).

However, there are reasons that motivate both investors and companies to follow the SPAC path and that is why it has become so popular since last year.

First of all, listing in the US is basically much more expensive than listing in other markets or listing through SPAC. Additionally, a traditional IPO requires a lot of roadshows and real-world meetings, which was not possible due to the COVID-19 crisis.

This is the reason why SPAC has become one of the preferred solutions because of its lower cost. It is also more time efficient and feasible in the current environment.

Also read: Asia-focused SPAC Poema Global announced a US $ 300 million IPO in the US

Also, if you look at the bigger picture, the United States is actually opening its private market to unrecognized investors – starting with the enactment of the Employment Act a few years ago. year, allowing retail investors to buy start-up stakes online through crowdfunding approved for equity sites, to introduce new SEC regulatory reforms.

As a result, SPAC looks like an extension of the higher risk category and provides investment opportunities for later stage startups, and more people will have access to this type of high risk opportunity.

Sergei Filippov, Managing Partner, Morphosis Capital Partner

Without a doubt, Grab’s listing sets the stage for more Southeast Asian companies – such as gojek, Bukalapak, Tokopedia and Traveloka – to go public through SPAC. However, this won’t affect Southeast Asia’s startup ecosystem, as giants like Grab and gojek are no longer startups, technically speaking.

Grab is considered to have passed the H Series with US $ 10.1 billion has been raised hitherto. There is essentially no room for it to raise in the next round, other than launching an IPO – which is considered a possible by CEO Anthony Tan in November 2019, if and when all of Grab’s business will be profitable.

However, the profit part never happened. Based on Documentation was submitted to the SEC by Altimeter Growth on April 13We can see that Grab made a net loss of $ 2 billion + for the three consecutive years through 2020. In 2020 alone, its net loss is $ 2.7 billion, while its net revenue is $ 1.19 billion.

Grab forecasts its EBITDA will be positive $ 500 million, while for 2020 it will be negative $ 800 million. For example, the presentation became creative in convincing EBITDA to be positive for some businesses (i.e. in the mobile segment as of Q4 2019).

Also read: What does a Peter Thiel-backed Bridgetown IPO mean for SEA’s startup ecosystem?

Grab’s the pre-valuation of the SPAC deal is about US $ 15 billionBut with the SPAC and IPO deals, it’s currently valued at nearly $ 40 billion. In my opinion, the market signal is that even with negative EBITDA and past Series F and H phases, a company can still do an IPO and still be very attractive to investors – which I think Delivering a controversial message to young startups.

On the contrary, for the investors, that means there is still a good exit even at the latest stage. SPAC, despite the criticism they receive, is a good solution for end-stage companies looking to invest more.

Michael Lints, Partners, Golden Gate Ventures

The Grab listing is positive for the startup ecosystem. It will bring the ecosystem to more international institutional investors. Additionally, the list would be a good outlet for early investors and employees, who could then re-invest that capital in startups.

The rise of SPAC has changed the way the market sees them. Renowned institutional investors have supported some of the major SPACs. A few years ago, SPAC may have had a dubious reputation but I don’t think that is the case now.

Sanjay Zimmermann, Principal, White Star Capital

Before 2020, SPAC was not as popular and not always used in the best environments, hence some criticism.But today’s main criticism is that there may be too many SPACs in the market, citing to the fact that some SPAC sponsors overpric their best investments in an attempt to close the trade before the end of the investment period tends to be 24 months.

Also read: Catcha joins bandwagon SPAC, filing a $ 250 million IPO in the US

There are good SPAC managers and less experienced ones and they should end up being evaluated on a case-by-case basis, but cannot be described as an overall portfolio as a good or bad investment.

Grab’s move seems to be a landmark transaction as the largest SPAC in SPAC history and the most valuable Southeast Asian company listed in the United States, which will undoubtedly set off a Impressive precedent if successfully completed for other upcoming major exits.

Dave Ng, General Partner, Altara Ventures

The SPAC is just one mechanism for making it public, and not all SPACs are equal. This is similar to the fact that not all IPOs are created equal. What’s more important is that the underlying assets and the fundamentals of business are taken into consideration, whether through SPAC or a typical IPO listing.

In Grab’s case, there are some serious supporters, including Fidelity, BlackRock, T. Rowe Price, Temasek, PNB, Mubadala and Janus. These are the top level investors that any company that is listed on a stock exchange wants on their books.

Robson Lee, Partner at Gibson Dunn’s (Singapore)

Grab’s listing paid the price for the perception that the SPAC path to the stock market was a way of entering the back-door capital market for companies lacking in basic, questionable prospects and / or shady management. . There will always be the inevitable black sheep in every market.

Grab’s structure and listing terms suggest management is focused on expanding its burgeoning footprint with listing funding. The CEO has made it clear that Grab will be a force to be reckoned with in its core businesses, highlighted by its respectable financial performance by 2020.

photo taken by Rayson Tan on Unplug

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