16 Sep 2020

Alibaba in discussions to invest US$4 million in Grab

Alibaba in discussions to invest US$4 million in Grab

With Alibaba’s Ant Financial Group already making the headlines recently for what could be one of the largest IPO in history, it has once again hogged the spotlight for entering into talks to invest US$3 billion into Southeast Asian ride-hailing giant Grab Holdings Inc.

Although talks are not yet finalized and nothing official has been confirmed, the Chinese e-commerce titan is likely to spend a proportion of the funds to acquire some of the Grab stock held by Uber Technologies Inc. Prior to Alibaba’s interest in Grab, Alibaba had already made inroads into Southeast Asia with its first investment in Lazada, Southeast Asia’s largest e-commerce group, in 2016. If this deal with Grab goes through, Alibaba will gain access to data on millions of users in eight countries, a growing delivery fleet as well as a stake in digital wallet and financial services.

The funding — about a fifth of Grab’s last known valuation of $14 billion — comes amid growing questions over the company’s ability to live up to its lofty price tag as it grapples with the impact of the coronavirus pandemic. Chief Executive Officer Anthony Tan said the company is facing its “single biggest crisis,” while co-founder Tan Hooi Ling warned in May of a “long winter. 

Alibaba’s potential $3 billion investment in Southeast Asia’s Grab could reportedly boost the user growth of e-commerce subsidiary Lazada, which has been losing ground against Tencent-backed Shopee. Lazada may tap the sizable ride-hailing and food-delivery user base of Grab, whose services typically have higher usage frequency than e-commerce.

Existing investors have also been frustrated by what they see as value-destroying competition with Grab’s regional arch-rival Gojek. The world’s largest ride-hailing companies have waged years of costly battles in each other’s’ territories before they agreed to stay out of each other’s’ core markets. The truce left Uber with considerable stakes in its rivals worth more than $9 billion, including a 23.2% stake in Grab at the end of 2018. Under the terms of a deal that Uber struck to exit Southeast Asia, Grab is on the hook for more than $2 billion to the San Francisco-based company if it doesn’t go public by mid-2023.

Alibaba’s injection of funds will likely lessen the harshness of Grab’s “long winter”.