Ride-hailing company Grab (NASDAQ: GRAB) debuted on Wall Street yesterday in the largest SPAC merger ever to make it to market. The fanfare was short-lived, however, as the stock price dropped by more than 20% by the end of its first full day of trading. Let’s analyze exactly what happened.
What is Grab?
Grab is a Singapore-based “super app.” It offers ride-hailing, food delivery, and digital payment services among a host of other things. In April, it agreed to go public via a record-breaking $40 billion blank check merger with Altimeter Growth Corp. The deal would see Grab become the largest Southeast Asian company to ever debut on Wall Street, and the largest-ever company to close a SPAC merger.
The public listing was originally slated for July, but Grab needed more time in order to conduct a thorough internal financial review. The deal saw the company raise funds from investing giants such as Fidelity and BlackRock, yet despite this initial confidence, the company is yet to make a profit. Revenue was down 9% year-over-year (YoY) in its most recent filing as net losses ballooned to $988 million.
What happened after the SPAC merger?
Grab opened up Thursday, trading under the ticker symbol GRAB, at $13.06 per share. This was an initial rise, as the SPAC company had closed the previous day trading at $11.01. The stock then began to tumble and ended up closing the day trading at $8.75.
So should I buy Grab stock?
Investor sentiments for SPACs seem to be waning following some pretty underwhelming entries to the market this year. This very well could be a primary cause for Grab’s sudden downturn. With such a hyped entry to the market, it was always likely to have a slightly inflated price. The initial fall off could see the price reach a more agreeable point from which the company can now grow sustainably.
The key for Grab is likely to be whether or not it can begin to turn a profit. The company has a huge addressable market, operating in over 465 cities already. If it can turn this market into profit, it could well have the potential to be a valuable growth investment in the future.
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Financial Writer at MyWallSt
Pádraig’s favorite stock is Nike. Growing up as a sports fanatic, seeing Nike collaborate with athletes like Jordan, Lebron, and Ronaldo inspired him and cemented the brand in his mind. Now, despite having failed miserably in his attempts to earn a fabled Nike sponsorship, he still believes in the innovation and creativity behind Nike and is convinced they will only grow stronger as the world's leading sports brand.