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Malaysian Internet entrepreneur Anthony Tan will drastically increase his control over his Grab company when the Southeast Asian technology group joins Nasdaq later this year.
To an extent that would be the envy of his Silicon Valley colleagues, Grab’s CEO and co-founder will have 60.4% of the company’s voting power, while owning a 2.2% stake.
This is a feat comparable to that of Facebook’s Mark Zuckerberg and unprecedented for a deal involving a special-purpose acquisition company.
The funds were in papers filed last week after the Singapore-based company released a record deal to combine it with a New York-listed Spac launched by Altimeter, a Silicon Valley group, which values the business at nearly $ 40 billion.
He presentation also revealed that the company, whose superapp it offers from travel to deliveries and financial services, has informed the U.S. Department of Justice of possible violations of anti-corruption laws.
Proponents say Tan needs control to make quick and difficult decisions as he navigates Grab’s eight markets. The deal is a crucial test of international investors ’appetite for a technology company with operations spread across the highly diverse and emerging Southeast Asian region.
But its control over the company’s management with SoftBank’s support marks the first time a Spac deal consolidates a founder’s voting rights to that degree, experts say.
Such an imperative majority vote for a CEO is “unprecedented” for a company looking for a Spac route, said Robson Lee, a partner at law firm Gibson Dunn in Singapore. “While it’s not uncommon for high-tech companies looking for a quote to consolidate management shares with additional voting rights, an absolute majority of 60% will be the first in the market,” Lee said.
Others say it more forcefully.
“By ignoring a traditional IPO, Grab has attracted less control over Anthony’s control,” said an investment banker with direct knowledge of the deal.
While commonplace in technology, these deals are not always popular, as evidenced by the backlash against Adam Neumann, co-founder of WeWork, and the shareholder protests against Zuckerberg, who holds about 60 percent of the power vote on Facebook.
The details of Tan’s control did not come as a surprise to Indonesia’s Grab-based Gojek override. Fusion conversations between the two companies were abandoned late last year before Grab began considering a merger of Spac, and people close to the talks said Tan had demanded control indefinitely as “CEO of for life “. Grab has denied the reports.
A long-term Grab investor said Tan, who comes from one of Malaysia’s wealthiest families, “needs a high level of power” to negotiate a seat at the table in the disorderly interconnected world of conglomerates, politics and regulation family management.
“The point is that Southeast Asia in itself is not a homogeneous market. . . It’s a collection of different markets with their own sets of regulatory considerations, ”said Lawrence Loh, director of the Center for Governance and Sustainability at Singapore National University.
In his presentation, Grab outlined several risks, including an investigation he initiated into possible violations of anti-corruption laws related to his operations in a country. The company reported possible violations to the Justice Department, but declined to comment when the Financial Times contacted him.
Nirgunan Tiruchelvam, head of equity research in the consumer sector of the Tellimer group, said Nirgunan Tiruchelvam, who has the responsibility of Grab and Tan to justify the dichotomy between ownership and voting shares and show that it is in the interests of shareholders.
“If you can argue that such a disproportionate proportion of votes would be beneficial to shareholders and add value to a new management of the company, it is possible that shareholders will feel comfortable with it.”
But even key shareholders have had their voting power diluted through the dual-class share structure, similar to Facebook. SoftBank, Grab’s largest shareholder, has an 18.6% stake that will translate into just 7.6% of the vote. Uber’s 14.3% share has 5.8% of the vote and Didi Chuxing’s 7.5%, only 3.1%.
“At the moment, we are only happy with liquidity, but in the long run we want to see real progress towards profitability,” one investor said.
This is still years away. Grab has lost money every year since its inception in 2012 as it has faced other well-funded competitors. Cumulative losses reached $ 10 billion at the end of 2020. Last year it reported a net loss of $ 2.7 billion compared to net income of $ 1.6 billion and is not expected to match until 2023.
In addition, Grab has not said whether he will appoint any independent director, nor does he indicate what balances and deposits are placed in Tan. No information has been released on the succession or who inherits Tan’s shares.
“More details can be found in the F-4 registration statement to be filed with the SEC [the US Securities and Exchange Commission], and to comply with this regulatory process, we will not be able to share more until the F-4 is completed, ”Grab said in a statement.
Jeffrey Seah, a partner at Singapore-based venture capital firm Quest Ventures, said: “While it has oversight rights, it has kept its management team intact. This is a [type of] check and balance “.
But even the oversight shares owned by Grab co-founder Tan Hooi Ling and President Ming Maa will be beneficially owned by Tan under a deed to be introduced at the time of the merger.
So far, Grab’s big investors seem happy to support Tan. Funds investing in the deal include BlackRock, T Rowe Price, Fidelity, Janus Henderson, Abu Dhabi’s Mubadala, Singapore’s Temasek, Malaysian fund Permodalan Nasional Berhad, as well as several wealthy Indonesian family offices.
The test will come when Grab joins the Nasdaq, Loh said. The deal has been approved by Grab and Altimeter Growth boards, and could be closed in July.
“The moment of truth will be when we discover the quotation price and when it is really quoted. . . If there are concerns, all investors will probably give you a discount, ”he added.
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