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Miguel Cordon · · 5 min readGrab shares may drop further as more stocks flood the market
Grab, the Southeast Asian super app, fell over 20% to US$8.75 per share at the end of its first day of trading after opening at a 19% premium to its listing price.
Image credit: Google Finance
At the end of this week, Grab will have around 29.2% of its outstanding share capital or about US$11 billion worth of stock available for public trading.
But here’s the kicker: another 2.6 billion shares, worth roughly US$23 billion based on recent stock prices, will be released to the public by June, Aequitas Research said, citing Grab filings, in a note released shortly before Grab’s IPO.
1.3 billion shares could be released in February next year if the stock trades above the US$12.50 mark by then.
Image credit: Aequitas Research
Grab clarified to Tech in Asia that the timeline given by Aequitas Research is accurate, but the dates are not yet shifted (Grab’s first trading day is December 2, not July 19).
Grab to face market pressures
The release of the additional stock will likely put downward pressure on its market performance, analysts say. “That is huge and will act as an overhang on the stock price,” Brian Freitas, an analyst with Smartkarma, told Tech in Asia.
However, if Grab’s stock moves higher than its current price and lands near or above the US$12.50 target by February, they may include it in the Morgan Stanley Capital International (MSCI) Singapore Index, he added.
The index tracks the performance of the large- and mid-cap segments of the Singapore market, acting as a base for exchange-traded funds. This would mean that funds tracking the MSCI Singapore Index would purchase roughly 28.7 million Grab shares.
“Though this could be higher depending on the free float (number of outstanding shares available for trading), which depends on the lock-up expiry in February (the potential release of 1.3 billion shares),” Freitas said. “That could provide some support for the stock.”
In a December 1 note on SmartKarma, Freitas mentioned that Grab’s entry into the Singapore Index is expected at around May. Based on requirements, Grab’s entry into the index as early as February next year would be possible as well.
Aequitas Research noted that it also expects a similar outcome as more shares get released.
End of lofty tech valuations?
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There’s still 2.6 billion shares, worth roughly US$23 billion as of current prices, that will be released to the public by June next year.
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