Grab, the superapp that made Uber quit Southeast Asia, to go public through controversial 'SPAC'

Singaporean superapp Grab announced yesterday that it plans to go public in the United States – through a $39.6bn merger with a Special Purpose Acquisition Company (SPAC). The company cited its strong financial performance despite COVID-19 as the reason to become a public company. Grab said in 2020 that it accounted for 72 …

[TeeCee]

SPACs.....exist solely to raise capital through an IPO...

That's a little simplistic, the clue's in the name "Single Purpose Aquisition Company". The problem they exist to circumvent is that the rules around an IPO are quite stringent when it comes to the viability of the company being floated. Thus what you do is float a company that does nothing, the SPAC. This has books that say it has ${cash}, no liabilities and no expenses and thus easily meets the financial criteria. The SPAC then takes over the real company and as there are no pesky viability rules for takeovers, this goes through.

Presto, a dodgy, high risk business successfully floated without its murky books and iffy practices being pried into by inspectors.

The interesting thing here is that taking this approach is almost invariably more expensive than an IPO, as everyone involved takes a cut, but companies still do it. The fact that they're happy to shell out, purely to avoid proving they meet the financial criteria of the stock market, gives you a really good clue as to how sound their business actually is.

[Zippy´s Sausage Factory]

Interesting point about the soundness of the business. I keep expecting Uber and Lyft and all these "gig economy" companies to fall over any day as people wise up to the cash grab that they really are.

That said, I wouldn't be feeling very comfortable if I were an Uber investor right now. A competitor you already surrendered to in one market just parked its tanks on your lawn?

Well, I better go put my popcorn on. Looks like this is going to be fun.

[Triggerfish]

Grab actually seems quite suited to SEA in a way, the usefulness of a motorcycle driver you can send to pick up anything, and the amount of motorcycle taxis out here (and maybe a bit of the fact you see the fee since gypsy cabs, overcharging etc is quite common on some places) , it's pretty much the default choice for anyone here, even to the point of getting a grab even on a street there is taxis.

I'm not sure it will work as easily in somewhere like the USA though.

[Charlie Clark]

While many of the SPACs ("special purpose" is also used) are indeed simply trying to avoid scrutiny, there is also the perceived problem of broken IPO pricing, which the banks determine and hence favours them and their clients.

As for scrutiny: in world of near-zero interest rates, there is less and less of this.

[Anonymous Coward]

The other thing is speed. While the private company, Grab in this case, could do its own IPO (assuming it's not dodgy) more cheaply, the IPO process takes time. SPACs allow for the investors in the acquired company to get their money immediately.

[DS999]

Presto, a dodgy, high risk business successfully floated without its murky books and iffy practices being pried into by inspectors

Which is fine, the people dumb enough to invest in SPACs before they make their dodgy high risk acquisition get what they deserve when the house of cards eventually collapses. I don't see the problem.