Ride-sharing firm Grab has announced it will go public through a SPAC merger with Altimeter Growth Corp (NASDAQ:AGC). The record-setting deal values Grab at $39.6 billion, making it the biggest SPAC merger so far.
Grab agrees to largest SPAC merger to date
After the transaction closes, the Southeast Asian company will trade on the NASDAQ under the ticker symbol "GRAB." Special purpose acquisition companies are also known as "blank check companies," They allow firms to go public by merging with an already-public firm. SPACs are essentially shell companies formed with the intention of merging with an operating business. They help companies bypass the traditional initial public offering process.
Altimeter Growth's stock climbed over 8% in premarket trading following the announcement. According to CNBC, under the terms of the SPAC merger deal, Grab will receive approximately $4.5 billion in cash, including $4 billion through a private investment in public equity, or PIPE, managed by Fidelity, BlackRock, Morgan Stanley's Counterpoint Global fund, T. Rowe Price and Temasek, Singapore's sovereign wealth fund. PIPEs allow firms to raise capital from a small investor group, enabling the market debut through the financing.
Grab serves over 187 million users in more than 350 cities and eight countries. The company provides multiple digital services, including ride-hailing, hotel bookings, food delivery, online banking, insurance and mobile payments through its app.
SEC scrutinizes SPACs
Grab could face an uphill battle with its SPAC merger as the Securities and Exchange Commission increases its scrutiny of such deals. According to Bloomberg, the agency released new guidance. It states that warrants, which early investors receive, might not be considered equity instruments. Instead, warrants might be liabilities for accounting purposes.
Depending on the timing, the issue could affect Grab's SPAC merger if it is not resolved before then, although there is a chance that it won't since the SPAC is already publicly listed. Sources told Bloomberg that the SEC started contacting accountants last week with the new guidance on warrants.
The sources added that hundreds of filings for new SPACs could be affected. The agency said it wouldn't "declare any registration statements effective unless the warrant issue is addressed," according to a note to clients by accounting firm Marcum.
The accounting guidance represents the SEC's latest effort to rein in the booming SPAC market. For months, the SEC has been warning investors that they aren't informed of all the possible risks related to such firms. SPACs list on public stock exchanges to raise money so they can buy another company, which means investors put money in before knowing what firm the SPAC will buy and understanding all the possible risks facing it.