How Grab, Asia's Uber, stumbled before and after its $40 billion SPAC, with pandemic layoffs and a teary all-hands with its CEO

• Grab, the Uber of Southeast Asia, went public in a $40 billion SPAC deal in December 2021.
• But its share price has since tumbled and sources say morale was low in the leadup to the deal.

In June 2020, the usually smiling Anthony Tan teared up before his employees.

The then 38-year old chief executive of Grab — Southeast Asia's answer to Uber — should have been getting the troops pumped amid COVID-19 lockdown blues.

"AT," as employees nicknamed Tan, was instead justifying during a town hall why he had to cut about 5% of jobs, or 360 roles. He read from a prepared note.

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"I remember him saying: 'I did not want to do this at all. It's the last resort,'" a former employee told Insider. "Everyone knew someone who was laid off. Morale was low, and we didn't know what was going to happen with the company next."

A Grab spokesperson declined to comment for this article.

AT's tears were a shock for some Grab employees, who had prided themselves as staff of Southeast Asia's most valuable startup and a poster child for how the region could match — or at least ape — Silicon Valley innovation. Big-name investors like Japanese investing conglomerate SoftBank had signaled faith in the vision by plowing around $3 billion into the firm.

"The older birds remember that not too long ago they had to go around convincing taxi drivers to own a phone so that they could join Grab's platform, be on call with Grab," a second former employee said. Some employees wondered if the company was eventually going to be listed, an idea that felt "nuts," he added.

But lockdowns forced Southeast Asia's hundreds of millions of commuters and drivers off the streets, and Grab's ride-hailing arm took a hit. According to an April 2021 SEC filing made by Altimeter Growth, the blank-check company that would later merge with Grab, the value of transactions for the startup's ride-hailing services in 2020 fell 43% from the previous year. "Overnight, I saw ride numbers going off the cliff," said the first former employee.

The pandemic had likewise put Grab's competitors to the test. Across the Pacific Ocean, Uber said earnings from its ride-hailing arm fell 44% in 2020.

Could Grab bounce back?

Harvard-educated founders pitched their version of Uber

Grab started life in 2011 as MyTeksi. Founders Anthony Tan, Tan Hooi Ling, and Adeline Chan all studied at Harvard Business School, pitched the concept during a contest, and reached second place. At the time their idea was directly compared to Uber, then called UberCab.

With the $25,000 prize money, they launched MyTeksi in Malaysia in 2012, about a year before Uber would try to compete in the region.

Anthony Tan remains CEO and an occasional paper billionaire, while Tan Hooi Ling, or "Ling" as she's called by employees, is chief operating officer. Little is known about Chan after Harvard.

The Tans, who are not related, hoped MyTeksi could tackle Malaysia's problem with poor and unsafe taxi services. By 2013, it had 2,500 drivers across four Malaysian cities and received a booking every eight seconds, spurring competitors to launch similar services, TechCrunch reported. MyTeksi started expanding into Thailand, Singapore, and the Philippines, where it was known as GrabTaxi. It later made Singapore its base in 2014.

Big-name investors such as SoftBank and Temasek invested into the startup and by August 2015, it achieved unicorn status after receiving an injection of $350 million. The startup then took on its current name, Grab, in 2016 to reflect its growing array of services.

Mopeds, tuk-tuks, and taxis are popular modes of transportation on Southeast Asia's congested streets. They're also affordable and readily available in areas where public transport is lacking. Grab latched onto these quirks of commuting in Southeast Asia, and focused on localizing its services in each market it operated.

It also kept prices low: base fares for a moped ride in Vietnam or a tuk-tuk commute in Cambodia cost the equivalent of $0.50 on Grab's platform as of April. It also made it easy for users to pay electronically in a region where cash remains king.

The app boomed. Grab saw off Uber in the region, buying its operations in Southeast Asia. A few months later, Grab unveiled its ambitions to be Southeast Asia's first "everyday super app." Grab now has 30.9 million users across 480 cities in eight countries who use the app to hail taxis, order food, make payments online, or access services like micro insurance and telemedicine.

It's "Uber, DoorDash, and Venmo, all in one," in the words of Ling in a Bloomberg interview.

Grab, like other ride-hail businesses, went into fight or flight in the pandemic

The pandemic crippled every ride-hailing business and, after its layoffs in 2020, Grab went into fight-or-flight mode, trying to bolt profitable divisions onto its core ride-hail and delivery offerings.

As employees experienced it, this involved pitting different teams against each other and green-lighting and sunsetting projects to find as many that made the most financial and ethical sense, said two sources.

"It was like placing their bets on many different horses to see which one would win the race," said another former employee.

One floated idea was a so-called "GrabMassage" concept, inspired by a now-shuttered service offered by Indonesian rival Gojek, a person with knowledge of the project told Insider. "The optics weren't that great. Grab wanted to be a family-friendly brand, so we didn't pursue it," the person said. A source close to Grab disputed that GrabMassage was a serious proposition.

More successful was the acquisition of Jaya Grocer, a supermarket chain in Malaysia. The deal was announced in January 2021 and closed early this year. "We wanted to own the backend of the grocery space so that we lose less margins and not have to hike fees for customers who want groceries," the person said.

It's common for young companies to grow fast by trying out many different things to see what sticks, an approach famously characterized by Mark Zuckerberg as "move fast and break things."

As a result, teams at Grab were set up and then dismantled; projects were pitched and got gunned down; there were constant reshuffles as priorities changed. "It was basically musical chairs," said an ex-employee.

There were also campaigns to focus employee attention on projects that would make financial sense.

There was "Path to Profitability," which looked at simple profit margin metrics, according to two former employees.

This at times zoomed in on how to raise gross merchandise value (GMV), or the total value of what was sold on Grab's platform, for a big part of 2020. Grab, which was at this stage trying to fend off competitors across its ride-hailing, food delivery, and financial payments businesses, looked at this metric to understand how much market share it had.

The reason for these changes eventually materialized. In April 2021, Grab announced that it would list on Nasdaq via a merger with special-purpose acquisition company (SPAC) Altimeter Growth, and proceeded to tout its 2020 GMV numbers in ride-hailing and deliveries as proof of its market leadership.

"Grab is the category leader with growth and profitability at scale across segments," it claimed in a presentation.

Grab had planned to close the merger and go public in July that year, but was forced to delay until December because it had to audit its financial records.

In the lead up to the deal, the focus became monthly transacting users (MTU), or how many individual users transact on Grab each month. MTU was a metric that made the most sense to Grab's management when they wanted to see how successful the business was, the sources said.

Although Grab's SPAC announcement should have felt a coup, morale was low in the runup, the six sources interviewed for this article said, as the pandemic continued to pose a long-term threat to the business.

In December, Grab raised $4.5 billion through its SPAC deal, and its shares hit opening price of $13.06 apiece, briefly making CEO Anthony Tan a billionaire for a few hours, Bloomberg reported.

The exuberance was short-lived, as investors peeked under the hood.

On March 3, Grab revealed that net losses had widened by 73% to $1.1 billion for the quarter ended December 31, the company said in its first earnings call as a public company on March 3.

For the full year, losses had widened by 30% to $3.56 billion. Its stock price fell by 37% and closed at a record low of $3.28 after the results.

Law firms spotted an opportunity amid the turmoil: Insider found at least 11 US legal firms that are building cases for class-action lawsuits alleging Grab deceived shareholders.

"What took the market by surprise was that they had expected Grab to move away from dishing out incentives, but that increased instead," said Gerald Wong, founder of investment education website Beansprout.

Dealing with a driver shortage after lockdowns, Grab's incentives for drivers jumped 58.3% from a year ago to reach $22.8 million in the last quarter, numbers from its March earnings call show. That's more than a third of what was spent in total for the year, at $65.9 million.

Grab has also had to dish out more money to retain or attract new passengers or anyone who would buy on its platform. In that same quarter, it spent $300.8 million to lure users, a sum that accounted for more than a third of the full year's expenditure.

Peter Oey, chief financial officer, told analysts at the earnings call that it may take a quarter or two for Grab to get demand and supply of its services to match together. "It's a marketplace at the end of the day," he said.

Pride, and profitability

As the world opens up, people are back on the streets to eat, drink, or simply to have fun. Uber said recently that its ride-hailing business is climbing up to pre-pandemic levels. It's the same tune in Southeast Asia for Grab where ride-share demand is recovering.

In its latest earnings report, Grab narrowed its loss for the quarter ended March to $435 million from a year ago. User spending on the platform rose 19% over the same period to $155, "as countries eased pandemic restrictions further during the quarter," the firm said.

But concerns about profitability continue to plague the firm. Grab is comparable to US peers Uber and DoorDash, but the Southeast Asian company is posting steeper losses than its Silicon Valley counterparts. Its share price is currently $2.66 — a far cry from its $8.75 closing price on its first day of trading.

"Both Uber and Doordash generate positive adjusted EBITDA while Grab may take at least 24 months to reach positive adjusted EBITDA in our view," said Sachin Mittal, an analyst at DBS in Singapore, according to a report from The Edge.

For now, employees remain bought into the mission but they're as in the dark as investors on the most important long-term question. "We really do make a difference in people's lives," one of them told Insider. "But do you think we'll be profitable?" he mused.