Pandemic could dampen enthusiasm for an IPO

Grab will be released to the public on Thursday (December 2), and we’ll see what the appetite is here in the US for the super-app that focuses (for now) on Southeast Asia – and, by extension. , platforms that offer a broaden the range of services.

Grab will be listed on the high-tech Nasdaq stock exchange following the merger of its Special Purpose Acquisition Company (SPAC) with Altimeter Growth Corp.

Read also: Get ready for the opening of the Nasdaq on December 2

And digging through the company’s prospectus filed with the Securities and Exchange Commission, the company predicts its GMV will grow from around $ 16.7 billion in 2021 to $ 34.2 billion in 2023.

This growth would come in tandem with broader favorable market and economic trends.

In the prospectus, the companies noted that Southeast Asia is one of the fastest growing economies in the world, growing faster than China and the United States, and is on track to become the world’s sixth largest economy measured by GDP by 2030. At the same time. , disposable income is expected to increase by 8.2%, compounded annually, until 2025.

Regarding the will and the ability to live more fully through an application and a technological device, the percentage of households with at least one smartphone in hand stands at 68% and is on the way to increase this penetration to 85% by 2025.

Referring to its core business, the company said spending on ‘land mobility’ in Southeast Asia was increasing by just over 9%, compounded annually, from the equivalent of $ 168 billion. this year to $ 231 billion in four years. . Online penetration of this market is only a few single-digit percentage points, and overall the GMV (online) stands at $ 5.7 billion in 2021, reaching $ 19 billion. dollars in 2025.

And in a nod to the direction of things, Grab noted that “the demand for financial services in Southeast Asia has not been met, with a serious mismatch between the demand and supply of services. fundamentals such as payments, transfers, savings, credit and insurance. . “

Against this backdrop, cash payments remain the primary form of exchange between businesses and consumers, where last year 80% of transactions were made in cash, simply because cashless payment options failed. not been and are not available. In the meantime, 40% of the region’s population remains unbanked or underbanked.

Certainly, the market opportunity is noticed and exploited by direct competitors. In one example, earlier this year Gojek completed its acquisition of Tokopedia to form the GoTo Group. GoTo is also on track for its own IPO, likely in local markets in Indonesia, as reported by Reuters.

This combined company offers rideshare, delivery, and finance services in its own attempt to build a super app.

Some pressures in place

Exploring Grab’s financial data, in the year ending December 2020, the company’s GMV increased just over 1% to $ 12.5 billion (compared to to 2019), while the number of users transacting fell slightly, to 24.5 million, by 16% year-on-year. The pandemic persists, of course, and we would risk guessing that the emergence of variants such as omicron could shake up core businesses a bit longer.

The latest wave of profits, as reported by Grab, shows losses increasing, with revenue pressures also in place. As we wrote in this space, while third-quarter sales fell 9% to $ 157 million, net losses, related in part to non-cash charges, widened year-over-year. further to reach nearly $ 1 billion in the last third quarter, compared to the equivalent in USD of $ 621 million last year. EBITDA, a rough measure of cash flow, was about $ 212 million in losses compared to $ 128 million last year. These downward trends have come as major markets such as Vietnam remain hard hit by the continuing pandemic. MTUs fell to 22.1 million from 23.9 million in the third quarter of last year – and, let’s note, down from the end of 2020.

Long-term ambitions of being a one-stop-shop for a range of services can indeed be realized, aided by the platform model. But in the short term, the uncertainty of COVID and various variants can prove to be an obstacle to achieving this.

Read here: Grab’s third quarter results show bumpy path to super app status as Asian lockdowns persist



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