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2021-12-08
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The Grab IPO's Many, Many Problems
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Mumaizah
2021-12-08
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The company, or rather the SPAC it merged with known as Altimeter Growth Corp, debuted its IPO last Thursday at a price of $13.05, achieving a valuation of nearly $40 billion and making it one of the largest IPOs of the year. But as CNN reported, the company's valuation declined by 21%. As of the time of writing Monday morning, Grab currently has a share price of $8.99, giving it a market cap of around $35 billion.</p>\n<p>Company president Ming Maa put a brave face on this initial result, telling Fortune that Southeast Asia is on the cusp of a digital revolution and that he believes Grab can grow rapidly and become profitable. But when one looks at Grab's financial numbers and prospects, there are many reasons to be very concerned about this company's future. Grab could very well become another Uber(NYSE:UBER), which after its recent fall is now trading below its IPO price of 2.5 years ago.</p>\n<p><b>The Company Problem</b></p>\n<p>Grab is at its core a ridesharing company and debuted as a taxi app in Malaysia in 2012. But like Uber, it aims to be so much more. The company states in its prospectus that:</p>\n<blockquote>\n \"We enable millions of people each day to access driver- and merchant-partners to order food or groceries, send packages, hail a ride or taxi, pay for online purchases or access services such as lending, insurance, wealth management and telemedicine.\"\n</blockquote>\n<p>It operates across eight countries in the Southeast Asian region.</p>\n<p>At its core, Grab has three main businesses. Its first and most important is ride-hailing, which connects five million \"driver-partners\" with customers. Second, it focuses on food delivery, whether from restaurants or from grocery stores. Finally, Grab has begun focusing on financial services, which includes GrabPay, GrabInsure, and GrabFinance among others. GrabPay is a digital payments solution, GrabInsure offers a variety of insurance, including critical illness insurance and travel insurance, and GrabFinance provides access to loans.</p>\n<p>In short, Grab is offering a wide range of services and products to a region which is rapidly growing and becoming more affluent. Despite going public in the US, Grab is primarily focused with no plans to expand outside the region. Southeast Asia has been badly hit by COVID, and worries about the omicron variant could further decrease economic growth forecasts.</p>\n<p>But the region has plenty of potential, in terms of digital growth and a wealthier population. Grab expects the \"total addressable market to grow from approximately $52 billion in 2020 to more than $180 billion by 2025.\"</p>\n<p>The problem is that, while Grab's potential is high, it also faces intense competition in all these fields. This is especially so in the financial services sector, where Apple(NASDAQ:AAPL)and Google Pay(NASDAQ:GOOGL)(NASDAQ:GOOG)have become active recently. Grab does not have any distinguishing moat which uniquely distinguishes itself from its competitors. And as we have seen with Uber, competition means that ridesharing companies are forced to offer cutthroat rates and discounts, impacting their financial numbers and upsetting their workers.</p>\n<p><b>The Financial Problem</b></p>\n<p>Those discounts and cutthroat rates will be a further problem given Grab's financial situation. The good news is that Grab grew dramatically in over the past year. It reported a revenue of $396 million in the first half of 2021, a 406% growth compared to the same period in 2020.</p>\n<p>But while the revenue growth is impressive, Grab does not have a history of sustained revenue growth. The fact that it reported a revenue of$157 million for the 2021 third quarter, down 9% year to year thanks to increasing COVID restrictions, should further worry investors about whether Grab can maintain such high growth in the face of tough competition.</p>\n<p>Furthermore, its profitability numbers are awful. While tech companies losing money is nothing unusual, Grab did not even make a gross profit in the first half of 2021, with a cost of revenue of $507 million. Its total net loss was $1.4 billion over that timeframe.</p>\n<p>Grab wants to use a figure called adjusted EBITDA, which shows that its earnings improved from a loss of $550 million in the first half of 2020 to a loss of $325 million in 2021. But even if we are to accept this, we are once again looking at a lack of a history of sustained profitability growth. As Uber and Lyft (NASDAQ:LYFT) show, it is not easy to assume that a ridesharing company can become profitable anytime soon.</p>\n<p>Finally, there is the matter of Grab's $35 billion valuation. Grab had $14 billion in total liabilities and $3.6 billion in cash as of June 30, 2021. This gives the company an enterprise value of about $45 billion. If we extrapolate Grab's 2021 first half revenue over the entire year, that gives the company a ludicrous EV/revenue ratio of 56.8. Even this number could be higher, given that its second half revenue probably will not reach its first half, given its disappointing third quarter numbers.</p>\n<p>By contrast, Uber has an EV/revenue of about 5. While Uber is of course a far more established company, Grab's lower valuation is still ridiculously high even by the standards of a tech company.</p>\n<p><b>The Final Problem</b></p>\n<p>Ridesharing companies have not been good investments so far, with Uber and Lyft both falling below their IPO price. But even those companies, warts and all, are still much better investments than Grab. Whether we look at its outsized valuation, its recent drop in revenue, or the competitive nature of its markets, there is little reason to seriously consider this IPO. While it has major potential should things go well, this is already baked into the price. Investors should not even remotely consider this IPO.</p>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>The Grab IPO's Many, Many Problems</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nThe Grab IPO's Many, Many Problems\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-12-08 11:12 GMT+8 <a href=https://seekingalpha.com/article/4473779-grab-stock-ipo-many-problems><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nSoutheast Asian company Grab launched its public debut last week, but the price drastically fell, and it currently has a market cap of about $35 billion.\nGrab is competing in a rich market ...</p>\n\n<a href=\"https://seekingalpha.com/article/4473779-grab-stock-ipo-many-problems\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"GRAB":"Grab Holdings"},"source_url":"https://seekingalpha.com/article/4473779-grab-stock-ipo-many-problems","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1115551422","content_text":"Summary\n\nSoutheast Asian company Grab launched its public debut last week, but the price drastically fell, and it currently has a market cap of about $35 billion.\nGrab is competing in a rich market and offers a wide range of services, but faces intense competition on multiple fronts from larger companies.\nGrab’s revenue is growing rapidly, but it lacks a sustained history, and its profitability and valuation numbers need significant improvement.\nGiven the above factors, investors should not consider this IPO.\n\nThe past few days have not gone well for southeast Asian company Grab(NASDAQ:GRAB). The company, or rather the SPAC it merged with known as Altimeter Growth Corp, debuted its IPO last Thursday at a price of $13.05, achieving a valuation of nearly $40 billion and making it one of the largest IPOs of the year. But as CNN reported, the company's valuation declined by 21%. As of the time of writing Monday morning, Grab currently has a share price of $8.99, giving it a market cap of around $35 billion.\nCompany president Ming Maa put a brave face on this initial result, telling Fortune that Southeast Asia is on the cusp of a digital revolution and that he believes Grab can grow rapidly and become profitable. But when one looks at Grab's financial numbers and prospects, there are many reasons to be very concerned about this company's future. Grab could very well become another Uber(NYSE:UBER), which after its recent fall is now trading below its IPO price of 2.5 years ago.\nThe Company Problem\nGrab is at its core a ridesharing company and debuted as a taxi app in Malaysia in 2012. But like Uber, it aims to be so much more. The company states in its prospectus that:\n\n \"We enable millions of people each day to access driver- and merchant-partners to order food or groceries, send packages, hail a ride or taxi, pay for online purchases or access services such as lending, insurance, wealth management and telemedicine.\"\n\nIt operates across eight countries in the Southeast Asian region.\nAt its core, Grab has three main businesses. Its first and most important is ride-hailing, which connects five million \"driver-partners\" with customers. Second, it focuses on food delivery, whether from restaurants or from grocery stores. Finally, Grab has begun focusing on financial services, which includes GrabPay, GrabInsure, and GrabFinance among others. GrabPay is a digital payments solution, GrabInsure offers a variety of insurance, including critical illness insurance and travel insurance, and GrabFinance provides access to loans.\nIn short, Grab is offering a wide range of services and products to a region which is rapidly growing and becoming more affluent. Despite going public in the US, Grab is primarily focused with no plans to expand outside the region. Southeast Asia has been badly hit by COVID, and worries about the omicron variant could further decrease economic growth forecasts.\nBut the region has plenty of potential, in terms of digital growth and a wealthier population. Grab expects the \"total addressable market to grow from approximately $52 billion in 2020 to more than $180 billion by 2025.\"\nThe problem is that, while Grab's potential is high, it also faces intense competition in all these fields. This is especially so in the financial services sector, where Apple(NASDAQ:AAPL)and Google Pay(NASDAQ:GOOGL)(NASDAQ:GOOG)have become active recently. Grab does not have any distinguishing moat which uniquely distinguishes itself from its competitors. And as we have seen with Uber, competition means that ridesharing companies are forced to offer cutthroat rates and discounts, impacting their financial numbers and upsetting their workers.\nThe Financial Problem\nThose discounts and cutthroat rates will be a further problem given Grab's financial situation. The good news is that Grab grew dramatically in over the past year. It reported a revenue of $396 million in the first half of 2021, a 406% growth compared to the same period in 2020.\nBut while the revenue growth is impressive, Grab does not have a history of sustained revenue growth. The fact that it reported a revenue of$157 million for the 2021 third quarter, down 9% year to year thanks to increasing COVID restrictions, should further worry investors about whether Grab can maintain such high growth in the face of tough competition.\nFurthermore, its profitability numbers are awful. While tech companies losing money is nothing unusual, Grab did not even make a gross profit in the first half of 2021, with a cost of revenue of $507 million. Its total net loss was $1.4 billion over that timeframe.\nGrab wants to use a figure called adjusted EBITDA, which shows that its earnings improved from a loss of $550 million in the first half of 2020 to a loss of $325 million in 2021. But even if we are to accept this, we are once again looking at a lack of a history of sustained profitability growth. As Uber and Lyft (NASDAQ:LYFT) show, it is not easy to assume that a ridesharing company can become profitable anytime soon.\nFinally, there is the matter of Grab's $35 billion valuation. Grab had $14 billion in total liabilities and $3.6 billion in cash as of June 30, 2021. This gives the company an enterprise value of about $45 billion. If we extrapolate Grab's 2021 first half revenue over the entire year, that gives the company a ludicrous EV/revenue ratio of 56.8. Even this number could be higher, given that its second half revenue probably will not reach its first half, given its disappointing third quarter numbers.\nBy contrast, Uber has an EV/revenue of about 5. While Uber is of course a far more established company, Grab's lower valuation is still ridiculously high even by the standards of a tech company.\nThe Final Problem\nRidesharing companies have not been good investments so far, with Uber and Lyft both falling below their IPO price. But even those companies, warts and all, are still much better investments than Grab. Whether we look at its outsized valuation, its recent drop in revenue, or the competitive nature of its markets, there is little reason to seriously consider this IPO. While it has major potential should things go well, this is already baked into the price. Investors should not even remotely consider this IPO.","news_type":1},"isVote":1,"tweetType":1,"viewCount":306,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"CN","currentLanguage":"CN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":7,"xxTargetLangEnum":"ZH_CN"},"commentList":[{"id":6894554,"commentId":"6894554","gmtCreate":1638933769058,"gmtModify":1638933769058,"authorId":4096632226898790,"author":{"id":4096632226898790,"idStr":"4096632226898790","authorId":4096632226898790,"name":"Mumaizah","avatar":"https://static.tigerbbs.com/8fc41803d23fefb5d61d62d2d8bfa544","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":606779209,"objectIdStr":"606779209","type":1,"supId":0,"supIdStr":"0","prevId":0,"prevIdStr":"0","content":"<u>ok</u>","text":"<u>ok</u>","html":"<u>ok</u>","likeSize":0,"commentSize":0,"subComments":[],"verified":10,"allocateAmount":0,"commentType":"invalid","coins":0,"score":0}],"isCommentEnd":false,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/606779209"}
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