Malaysian internet entrepreneur Anthony Tan will dramatically increase his control over his company Grab when the Southeast Asian technology group joins Nasdaq later this year.
In a move that would be the envy of its competitors in Silicon Valley, Grab CEO and co-founder will have 60.4 percent of the voting power in the company, while owning a 2.2 percent stake.
This is an achievement comparable to that of Facebook, Mark Zuckerberg, and unprecedented for a deal with a specialty procurement company.
The possessions were contained in newspapers filed last week after the Singapore company unveiled a record deal to combine with a New York-listed Spac launched by Altimeter, a Silicon Valley group, which enterprise valued at nearly $ 40 billion.
The filing also revealed that the company, of which the super-app offers everything from delivery to deliveries and financial services, has reported potential violations of anti-corruption laws to the U.S. Department of Justice.
Proponents say Tan needs control to make quick and difficult decisions to navigate Grab’s eight markets. The agreement is an important test for international investors’ appetite for a technology venture with operations spread across the very diverse and emerging region of Southeast Asia.
But his grip on the SoftBank-backed company’s direction is the first time a Spac deal has entrenched a founder’s voting right to this extent, experts say.
Robson Lee, a partner at law firm Gibson Dunn, has an unprecedented voting right for a CEO ‘unprecedented’ for a company looking for a Spac route. “While it is not uncommon for high-tech companies to want a listing to hedge management shares with additional voting rights, an absolute majority of 60 percent will be the first in the market,” Lee said.
Others put it more straight.
“By bypassing a traditional stock market, Grab drew less attention to Anthony’s control,” said one investment banker with direct knowledge of the deal.
While common in the technology space, such arrangements are not always popular, as evidenced by the setback against Adam Neumann, the messianic co-founder of WeWork, and protests against Zuckerberg, which owns about 60 percent of the voting power on Facebook.
Details about Tan’s control did not surprise Grab’s rival, Indonesian super-app Gojek. The merger talks between the two companies were abandoned late last year before Grab began considering a merger with Spac, and people close to the talks said Tan had demanded indefinitely as a lifelong CEO. Grab denied the reports.
One long-term investor from Grab said Tan, who hails from one of Malaysia’s richest families, “needs a high level of power” to negotiate a seat at the table in the region’s interconnected world of family-run conglomerates, politics and regulation.
‘The thing is, Southeast Asia is not in itself a homogeneous market. . . It’s a collection of different markets with their own regulatory considerations, ‘says Lawrence Loh, director of the Center for Governance and Sustainability at the National University of Singapore.
In his submission, Grab outlined several risks, including an investigation he launched into possible violations of anti-corruption laws related to his operations in one country. The company reported the possible violations to the DoJ, but declined to comment by contacting the Financial Times.
The duty rests with Grab and Tan to justify the dichotomy between ownership and voting shares and to prove that it is in the interest of the shareholders, said Nirgunan Tiruchelvam, head of research on equity sector at Tellimer Group.
“If he can argue that such an excessive portion of the vote is beneficial to shareholders and adds value for further direction of the company, then it is possible that shareholders will be comfortable with it.”
But even major shareholders have had their voting power diluted via the two-tier share structure – similar to Facebook. SoftBank, Grab’s largest shareholder, has an 18.6 percent stake, which equates to just 7.6 percent of voting power. Uber’s stake of 14.3 percent has a voting power of 5.8 percent and Didi Chuxing’s stake of 7.5 percent, just 3.1 percent.
“For now, we are only satisfied with the liquidity, but in the longer term we want to see sincere progress towards profitability,” said one investor.
It’s still years away. Grab has lost money annually since its inception in 2012 because it has struggled with other well-funded competitors. At the end of 2020, the accumulated losses reached $ 10 billion. Last year, it reported a net loss of $ 2.7 billion against net revenue of $ 1.6 billion and will not break even until 2023.
In addition, Grab has not yet said whether he will appoint any independent board directors, nor in the filing what checks and balances will be placed on Tan. Information on the succession or who inherits Tan’s stock has not been released.
“Further details appear in the F-4 registration statement that will be submitted to the SEC [the US Securities and Exchange Commission], and to comply with this regulatory process, we will no longer be able to share until the F-4 is finalized, ”Grab said in a statement.
Jeffrey Seah, a partner at venture capital firm Quest Ventures, based in Singapore, said: ‘While he has a voting right, he has kept his management team intact. It’s a [type of] check and balance. ”
But even the voting shares held by Grab’s co-founder Tan Hooi Ling and President Ming Maa will be favorably held by Tan under a deed that will be entered into at the time of the merger.
So far, Grab’s big investors seem to be staying Tan. Funds investing in the deal include BlackRock, T Rowe Price, Fidelity, Janus Henderson, Abu Dhabi’s Mubadala, Temasek in Singapore, the Malaysian fund Permodalan Nasional Berhad, as well as a number of wealthy Indonesian family offices.
The test will take place when Grab joins the Nasdaq, Loh said. The deal has been approved by both the Grab and Altimeter growths, and it could close by July.
‘The moment of truth will be when we discover the listing price and when it is actually traded. . . If there is concern, all investors will probably give it a discount, ”he added.