Malaysian internet entrepreneur Anthony Tan is set to significantly increase his control over his company Grab when the Southeast Asian tech group joins Nasdaq later this year.
In a move that would be the envy of his Silicon Valley peers, the CEO and co-founder of Grab will own 60.4% of the voting rights in the company while holding a stake of just 2.2%.
It’s a feat comparable to that of Facebook’s Mark Zuckerberg and unprecedented for a deal involving a special-purpose acquisition company.
The holdings were contained in documents filed last week after the Singapore-based company unveiled a recording contract to combine with a New York-listed Spac launched by Altimeter, a Silicon Valley group, valuing the company at nearly $ 40 billion.
the deposit also revealed that the company, whose superapp offers everything from ridesharing to deliveries and financial services, has reported potential violations of anti-corruption laws to the US Department of Justice.
Supporters say Tan needs the control to make quick, difficult decisions when navigating Grab’s eight markets. The deal is a crucial test of international investor appetite for a tech company with sprawling operations in the highly diverse and emerging region of Southeast Asia.
But his grip on the management of the SoftBank-backed company marks the first time that a deal with Spac has enshrined a founder’s voting rights to such an extent, experts say.
Such a majority vote for a CEO is “unprecedented” for a company seeking a Spac route, said Robson Lee, partner at Gibson Dunn law firm in Singapore. “While it is not unusual for high-tech companies looking for a listing to root management stocks with additional voting rights, an absolute majority of 60% will be first in the market,” Lee said.
Others say it more bluntly.
“By bypassing a traditional IPO, Grab has drawn less scrutiny over Anthony’s control,” said an investment banker with first-hand knowledge of the transaction.
While common in the tech space, such arrangements aren’t always popular, as evidenced by the backlash against Adam Neumann, the messianic co-founder of WeWork, and the shareholder protests that Zuckerberg has faced, who owns around 60%. of voting power on Facebook.
The details of Tan’s control did not surprise Gojek, Indonesia-based rival Grab’s super app. Merger talks between the two companies were scrapped late last year before Grab began considering a merger with Spac, and people familiar with the talks said Tan had demanded control indefinitely as “CEO for life.” . Grab denied the information.
A long-term investor in Grab said that Tan, who comes from one of Malaysia’s richest families, “needs a high level of power” to negotiate a seat at the table in the interconnected world of China. region of family conglomerates, policy and regulation.
“The problem is that Southeast Asia itself is not a homogeneous market. . . It’s a different set of markets with their own sets of regulatory considerations, ”said Lawrence Loh, director of the Center for Governance and Sustainability at the National University of Singapore.
In his case, Grab highlighted several risks, including an investigation he launched into potential violations of anti-corruption laws related to his operations in a country. The company reported the potential violations to the DoJ but declined to comment on them when contacted by the Financial Times.
Grab and Tan bears the onus of justifying the dichotomy between ownership and voting stocks and proving that it is in the best interests of shareholders, said Nirgunan Tiruchelvam, head of equity research. consumption at Tellimer Group.
“If he can say that such a disproportionate share of the vote would be beneficial to shareholders and add value to the future direction of the company, then shareholders may be comfortable with that.”
But even key shareholders have seen their voting power diluted via the two-class share structure – similar to Facebook. SoftBank, Grab’s largest shareholder, has an 18.6% stake which will translate into a voting power of just 7.6%. Uber’s 14.3% stake has 5.8% voting power and Didi Chuxing’s 7.5% stake only 3.1%.
“Right now we’re just happy with the liquidity, but in the longer term we want to see real progress towards profitability,” said one investor.
It’s still years away. Grab has lost money every year since its inception in 2012, as it has battled other well-funded competitors. Accumulated losses reached $ 10 billion at the end of 2020. Last year he reported a net loss of $ 2.7 billion against net income of $ 1.6 billion and he expected not to break even before 2023.
On top of that, Grab has not said whether he will appoint independent directors, nor does his record say what checks and balances are placed on Tan. Information about the estate or who inherits Tan’s shares has not been released.
“Further details will be in the F-4 registration statement which will be filed with the SEC [the US Securities and Exchange Commission], and to comply with this regulatory process, we won’t be able to share more until the F-4 is finalized, ”Grab said in a statement.
Jeffrey Seah, partner at Singapore-based venture capital firm Quest Ventures, said: “Although he has supervisory rights, he has kept his management team intact. It’s a [type of] check and balance. ”
But even the controlling shares held by Grab co-founder Tan Hooi Ling and Chairman Ming Maa will be beneficially owned by Tan under a deed that will be entered into at the time of the merger.
So far, Grab’s big investors seem happy to back Tan. Funds investing in the deal include BlackRock, T Rowe Price, Fidelity, Janus Henderson, Mubadala in Abu Dhabi, Temasek in Singapore, Malaysian fund Permodalan Nasional Berhad as well as a number of wealthy Indonesian family offices.
The test will come when Grab joins the Nasdaq, Loh said. The deal has been approved by the two boards of directors of Grab and Altimeter Growth, and it could be concluded by July.
“The moment of truth will be when we find out the quote price and when it is actually traded. . . If there are concerns, all investors will probably give it a discount, ”he added.