Foreclosure shares plunge 37% to lowest on record as losses mount
(Bloomberg) – Shares of Grab Holdings Inc. fell 37% on Thursday after the company reported larger losses in the fourth quarter, bringing its market value decline since its IPO to $22 billion. through a merger with a firm blank check in December.
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The Southeast Asian ride-sharing and delivery giant has plunged 63% since its debut, placing it among the worst performers on the Nasdaq composite index over that period. Thursday’s drop marked its biggest ever selloff after the Singapore-based company’s quarterly net loss nearly doubled from a year ago, while revenue fell 44%. The drop came as 116 million shares changed hands, more than four times the average for the past month.
Grab – which has SoftBank Group Corp. and Uber Technologies Inc. as its two main shareholders – has struggled to stabilize since its merger with Altimeter Growth Corp. by Brad Gerstner late last year. The ride-hailing company has racked up losses since its inception and Thursday’s report showed growth spending was taking it away from profitability.
Its net loss reached $1.06 billion in the fourth quarter, against a consensus estimate of $645 million. These mounting losses have led investors to flee the stock alongside other companies that have yet to make a profit. Grab was the worst performer on the De-SPAC index on Thursday, as the basket of former special purpose acquisition companies fell 5.4% to a record low.
As the pandemic weighed on rideshare demand, Grab expanded its food delivery business to drive user growth. The online grocery market in Southeast Asia is expected to nearly triple to $11.9 billion in 2025 from $4.1 billion in 2020, according to Euromonitor International.
But while customer spending on Grab’s platform is growing, the growth isn’t yet translating into profits. Recognized revenue from last quarter delivery was only $1 million. Grab deducts the incentives he offers to drivers and consumers from sales, and his quarterly revenue fluctuates wildly depending on how much he spends on these efforts.
Its total incentive spend more than doubled to $583.5 million in the fourth quarter. For all of 2021, incentive spending soared to $1.78 billion from $1.24 billion the year before.
“We didn’t expect Grab to spend on such large incentives,” said LightStream Research analyst Shifara Samsudeen in a Smartkarma research report. This implies that the company is “struggling to grow its business and profitability appears to be a big challenge for Grab”.
Grab, founded by Anthony Tan and Hooi Ling Tan, has long been considered one of Southeast Asia’s most promising growth companies. Its business model is similar to that of Uber, the American ride-sharing and delivery pioneer that sold its Southeast Asian business to Grab in 2018.
Among Grab’s challenges is increased competition, including from Sea Ltd., Southeast Asia’s largest internet company. More directly, its Indonesian rival, Gojek, merged with e-commerce provider PT Tokopedia to become GoTo. The combined entity is preparing for an IPO in the country and in the United States this year.
(Updates with details on Grab’s expenses starting in the third paragraph)
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