A few germinating ideas from Harvard Business School’s MBA class of 2011 have led to contrasting fortunes a decade on in the public capital markets. Nadiem Makarim, currently Indonesia’s minister of education, culture, research and technology, went back to Indonesia after graduation and founded Gojek, which has become part of GoTo (a combination with Tokopedia). Anthony Tan and Tan Hooi Ling, on the other hand, returned to Malaysia and founded MyTeksi, which has grown into the self-styled superapp company Grab Holdings.
Both sides paint the town green in their “sustainable” corporate colours and compete vigorously for dominance in our post-pandemic lives from ride hailing, food delivery to digital finance across Southeast Asia.
In the Dec 13 Chew on This piece titled “Tap the keg overseas, but bring the party back too”, we explored the hubris of Grab’s US$40 billion ($54 million) de-special purpose acquisition company (spac) with Altimeter Growth Corp, in what is the largest de-spac deal thus far.
On the back of unrealistic hype and expectation, Grab’s trading debut on Nasdaq was underwhelming, with an initial pop from US$11.01 to US$13.06, but ended the day at just US$8.75.
Still, Grab managed to raise a hefty US$4.5 billion war chest without suffering much dilution and is still set on its ambition to roll across Southeast Asia. Major campaigns include launching its digital bank joint venture with Singapore Telecommunications, a potential win for a similar licence in Malaysia and further fintech moves it can germinate from taking a stake in Indonesia’s Bank Fama.
Grab CEO Anthony Tan remained positive and said: “The stock will go up and it will go down.” Little did many cheer leading analysts expect that the “down” trend continued all the way till April 18, when it closed at US$3.05, giving it a market value of just below US$12 billion.
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Some of the same analysts, who were valuing Grab at US$20 per share before the de-spac, have already made several rounds of downward revisions.
Hopefully, as the management hunkers down to execute the bold plans, opportunistic lawyers in the US rallying disgruntled investors in class action lawsuits will not distract them too.
Green shoots
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In contrast, GoTo — a couple of steps in the wake of Grab — enjoyed a much clearer view of how the US spac wave has subsided. GoTo shed its Pinkerton ambitions and listed on the stock exchange of Jakarta, its home market.
Amid some criticisms that it is too expensively priced, GoTo reduced the size of its offering to US$1.1 billion and extended the book-building date. GoTo enjoyed an auspicious start, rising 13% on its debut to close its first day with a valuation of US$32 billion that it was able to hold on to even after a week.
GoTo’s feat was commendable given how there is a global tech stock correction underway, and there is a war between Russia and Ukraine still raging. And GoTo is quoted in a stock market that remains less accessible to international investors, and that it ranks as the fifth-largest IPO amid a generally tough sell for IPOs this year. No mean feat indeed.
Of course, not all Indonesian tech unicorns enjoyed the same support. Bukalapak, for example, had pushed for a very ambitious valuation, and investors have answered by sending its shares down 67%. It remains to be seen if GoTo will find life as a public company a tad more difficult.
With GoTo’s listing, it is now the third largest stock on Indonesia’s JSX Composite Index, having overtaken Telekom Indonesia and behind only Bank Central Asia and Bank Rakyat. GoTo is assured of getting (however limited) support from local benchmark index investors. In addition, it enjoys unmatched support from a wider community of stakeholders.
As part of its IPO, GoTo has allocated US$20 million worth of shares to its 600,000 drivers. These gig workers who joined before 2016 received 4,000 shares worth US$94 based on the IPO price, and those who joined before February this year received 1,000 shares. Naturally, the 300,000 domestic retail investors — the largest ever to take part in an Indonesian IPO — forms another support base.
Brighten prospects
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Clearly by being “inclusive”, GoTo has created the additional buzz of aligning wider stakeholder interest as a positive externality from showing consideration to the people that made the platform a success and brighten its prospects.
If GoTo can demonstrate its ability to execute, then it stands a good chance of raising more public equity at a higher valuation than its more modestly priced IPO, including via a secondary listing at a more “international” exchange which might be another Asian market. The subsequent equity raising is not unexpected, given its estimated cash burn of US$2.2 billion this year and a further US$1.7 billion in 2023.
This is in sharp contrast to Grab, which listed far away on the Nasdaq. Its consumers, gig workers and stakeholders have to stay up at night to trade its stock. Grab could have — and can still — benefit from a secondary listing in Singapore to add regional institutional and retail demand, buffeting its stock price.
Limited impact
The recent coverage of Grab by a number of local and regional brokers is helpful, but has limited impact to convert its consumers into shareholders because of cross time zone accessibility of its stock.
Admittedly, Grab’s listing was unfortunately timed, with delays partly because of the extra scrutiny by the US Securities and Exchange Commission (SEC) on spac deals last year. By December last year, the Nasdaq correction had started, followed soon after with jitters caused by Russia’s invasion of Ukraine.
All these did not help, but neither did they help themselves by alienating the stakeholders and investor community in Asia which were ready to champion its success closer to home. With pipe investors and employees marked at the IPO debut price above US$11, it will be hard pressed to raise additional public equity for a period of time, unless it is a very dilutive issue.
Sure, there is no guarantee that Grab would have raised the US$4.5 billion it did, at the valuation it demanded, in any market in Southeast Asia. Neither would most have predicted that in 2022 — amid the global tech sell off — the second and third best performing markets in the world are Singapore’s Straits Times Index (up 10%) and JSX (up 7%).
Now, with equity market corrections in North Asia and the West, volatility from the tightening Fed cycle, inflation and Ukraine, if one were to be commercial and pragmatic on the outlook for the year, the markets to GoTo and Grab capital are right here where we belong.
Chew Sutat retired from Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange and he was awarded FOW’s lifetime achievement award in 2021
