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.
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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 watch 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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