![]() In fact, at a sufficiently large scale, profits are not necessarily a good sign. It has propelled its 18.6 per cent stake to US$6.1 billion, with a very good chance of it growing even higher in the future.Īnd if Grab’s stock returns to the $11 it started at yesterday, SoftBank’s stake will be worth another US$1.5 billion on top of it. In this spirit, Grab’s chief shareholder, Japanese SoftBank, which has dropped US$3 billion into the company since 2014, made another US$3.1 billion on the IPO itself. They care about growing revenues and market share, particularly in novel, developing industries where future potential is the largest. Its investors are risking their money purchasing a stake (that keeps bankrolling loss-making operations) not to draw cash from its day-to-day business, but in the hope of a growing valuation, which can multiply their investment. Many were better off closing down rather than taking losses for months on end.īut for a large enough corporation, which aims to become publicly traded, profits are of little importance. That’s why so many small companies collapsed during the pandemic, because even a brief disruption to their operations immediately destroyed the value for their owners. They exist to maximise shareholder value.įor a family store, bakery or a cafe, turning a profit is, indeed, how they maximise their shareholder (i.e. In reality, however, companies don’t exist to make profits. ![]() ![]() It’s not a charity and why do anything that keeps costing you more than you get in return? It sounds insane. Isn’t that the purpose? After all, when you start any business, you hope to make more than you’ve put in. Is burning money, posting endless losses some kind of a new way of becoming successful and rich? Is it a scam, perhaps?Īfter all, Grab isn’t exactly an exception in the IT industry, where many companies continue engaging in loss-making operations over many years (Grab’s former chief rival Uber springs to mind, Elon Musk’s Tesla is still losing money selling cars, and Singapore’s favourite e-commerce platform Shopee continues to run in the red).Ĭonventional wisdom would have it that the role of a company is to turn a profit for its owners. Are they crazy? Snapshot of Grab’s debut, opening around $13.05 over $11.01 that Altimeter - the SPAC allowing Grab to launch at Nasdaq - closed the day before / Image Credit: Nasdaq You may be wondering how is it possible that a company which has burned through billions of dollars - recently posting a loss of US$988 million for Q3 2021 alone - and is yet to turn a profit, can be considered successful, let alone achieve a multibillion dollar valuation on a prime US stock exchange?Īfter a brief spike, Grab’s stock collapsed 20 per cent below its IPO listing price, but even that didn’t dampen the spirits of its founders and investors. Instead, I’d like to turn your attention to something else: why is Grab even considered a great business? You can read all about it elsewhere, though - I’m not going to rob the market analysts of their jobs. As I’m sure you’ve already heard, Grab had its big day on Nasdaq yesterday (December 2), having finally gone public at a valuation of around US$40 billion, raising US$4.5 billion in the process. ![]()
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