Grab's US$40b SPAC talks signal race against Gojek-Tokopedia

GRAB could be in an intense race against rival and former merger prospect Gojek to make it to the public markets, judging from how both firms are reportedly in talks to list at a nearly US$40 billion valuation.

The companies might be eyeing a potential first-mover advantage. Global investors looking for a proxy to South-east Asia's digital economy could react more exuberantly to the firm that goes public first, said a venture capitalist who requested anonymity.

According to a Friday report by The Wall Street Journal, Grab is in talks to merge with a SPAC affiliated with Altimeter Capital Management, in a deal that could value the Singapore-headquartered company at US$35-40 billion. Altimeter has two US-listed SPACs; it is not known which one Grab might be looking to merge with.

In early February, Gojek was said to be in advanced merger talks with Indonesian e-commerce platform Tokopedia, with both companies also reportedly eyeing a US$35-40 billion valuation range for the merged entity upon listing.

Both Grab and Gojek had previously explored a merger, but failed to see eye to eye.

The frenzy around SPAC deals in South-east Asia also reflects how there is a perceived narrow window for public listings, given the continued uncertainties on how long the current stock market boom could last, market watchers said.

"Between competitors, a first mover would likely enjoy a greater share of the liquidity in the market by taking a first bite of the cake," said Gabriel Li, an associate at law firm Withers KhattarWong.

"Above and beyond that, the urgency may also be explained by recognition of the phenomenal appetite that the market has demonstrated for options to invest in South-east Asian tech entities. It is always wise to strike the iron when it is hot."

Analyst Angus Mackintosh, who publishes on Smartkarma, told The Business Times that it does "look rather like a race to list first for the unicorns".

Whether the US$40 billion valuation tag is right will depend on the company's fundamentals, which are still undisclosed. Based on data from Uber and Lyft, ride-hailing companies tend to carry a multiple of about three to four times of enterprise value to sales, Mr Mackintosh said. Grab and Gojek are also active in food delivery and fintech.

He added: "Grab has already said it is preparing for a listing anyway so it seems this move would be all about timing. Obviously valuations are pretty high right now, so possibly they see it as a window."

A SPAC listing may be a good way for unicorns and a company like Traveloka - whose industry has been so hard hit - to get to market more quickly, he said. The Indonesian online travel unicorn is eyeing a SPAC listing this year.

Li Jianggan, chief executive of venture builder Momentum Works, noted that there has been a major shift, where listed companies have much easier access to capital to capture growth than private ones. He cites how Sea's Shopee has been at an advantage in raising capital over Tokopedia this year, to capture growth amid the surge in Indonesian e-commerce last year.

That said, he does not think that there will be much of an impact if Grab and the merged Gojek-Tokopedia entity list within just a few months of each other.

"I think the wave of potential SPAC deals is more of investors chasing good South-east Asian deals, rather than the other way around. As for listing, the time window is indeed important; but for the long term, it is the fundamentals of the market - as well as of the companies - that would prevail," he said.

As he noted: "Lyft beat Uber to list first, but Uber is performing much better two years down the road.