Grab’s SPAC vehicle Altimeter near record low

Altimeter’s share price drop suggested the market is uncomfortable with the valuation pledged for Grab, as well as indicative of weakness in the broader SPAC market.

ALTIMETER Growth Corp., the blank-check company merging with internet giant Grab Holdings Inc., is hovering just a few cents above its record low after cratering 28% since the deal was unveiled in April.

Altimeter closed Thursday at $11.06, just shy of its $10.98 historical trough. That selloff came after Southeast Asia’s most valuable startup announced a deal on April 14 with the special purpose acquisition company of Brad Gerstner’s Altimeter Capital Management to go public in the U.S. by July, in the largest-ever merger with a blank-check company.

The Singapore-based ride-hailing and delivery startup is set to have a market value of about $39.6 billion through the combination with Altimeter, the companies said at the time of the announcement.

It’s raising more than $4 billion from investors including BlackRock Inc., Fidelity International and T. Rowe Price Group Inc. as part of the biggest U.S. equity offering by a Southeast Asian company. Grab declined to comment on Friday.

"SPACs have seen a bit of selloff so it reflects the general sentiment, ” said Angus Mackintosh, founder of CrossASEAN Research. The share price at current levels won’t make a big difference from Grab’s listing perspective, he added.

"It just means profits your SPAC owners would realize are diluted to some extent. They have effectively locked in cornerstone investors at a $40 billion valuation. Whether Grab can sustain that lofty valuation after listing, given the competitive landscape, is a bigger question.”

Nirgunan Tiruchelvam, head of consumer sector equity research at Tellimer in Singapore, said Altimeter’s share price drop suggested the market is uncomfortable with the valuation pledged for Grab, as well as indicative of weakness in the broader SPAC market.

Blank-check companies completed $181 billion of U.S. listings over the last five quarters, accounting for 55% of all IPO fundraising in New York, according to data compiled by Bloomberg. At the peak of the frenzy, more than 50 SPACs unveiled plans to raise a combined $17 billion during a single week in February.

But the pace of new deals has now slowed to a trickle, with only five blank-check companies submitting registration documents in the last week of April. U.S. regulators have been warning investors for months about the potential risks around SPACs.

Last month, they spooked dealmakers by floating the potential of different accounting treatment for one aspect of SPAC deals, a move that has forced many companies to review their results.

SPACs are investment vehicles that go public despite having no real business. The plan is to raise money from investors and use it to buy into another company, typically a private one that’s yet to be chosen.

The investors who buy into and fund SPACs when they first go public are typically institutions such as hedge funds, and the companies offer them the combination of a relatively small downside with a chance to make a tidy profit down the road.

Blank checks typically go public at $10 a share and have 24 months to find a target. If the company fails to identify one, it liquidates, and investors get their money back. Investors also get to vote on a deal and have a chance to redeem their shares whatever the result. - Bloomberg

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