Going public may boost Grab, Gojek valuations by billions

When Southeast Asia’s tech unicorns like Grab, Gojek, and Traveloka get listed on the stock market, public market investors – including average Joes – will finally have the chance to invest in them.

One big unknown, though, is how the public markets will value these companies and how far this will diverge from private valuations. The answer to these questions will not only affect investors, founders, and employees, but also have a wider impact on the region’s technology scene.

Tech in Asia’s analysis suggests that the total premium of a public markets valuation for Grab, Gojek, and Tokopedia could be as much as US$24 billion higher than their last reported private valuations combined.

Grab and Gojek riders on the streets of Indonesia / Photo credit: 123RF

In the world of investing and finance, venture capital and private equity are seen as sexier alternatives to public markets.

However, the reality is that public markets still exert a significant influence. For one, a public listing provides companies with access to a new and much larger pool of capital.

Equity mutual funds in the US alone manage US$8.4 trillion domestically, six times the comparable value managed by buyout funds and 18 times what venture capital manages.

This amount becomes even larger if you include foreign investors, which can access the US public markets relatively easily.

The process of going public is rigorous and shines a light on many aspects of the company, from its financials to corporate governance. Outcomes can differ wildly, as can be seen from the following examples.

The good, the bad, the ugly

Airbnb’s initial public offering is an example of a standout listing. The vacation rental firm’s shares were priced at US$68 apiece, higher than its initial target of US$44 to US$50. Its shares then rose to US$146 when it started trading in the secondary market.

By contrast, Uber priced its IPO shares at US$45 and reportedly at a valuation that was nearly a third less than the up to US$120 billion forecasted by its investment bankers.

Shares closed down by 8% on Uber’s first day of trading in the secondary market, leading the IPO to be termed a “debacle”.

While Uber at least made it through the IPO baptism of fire, WeWork’s journey was even more of a fiasco.

Strike while the iron is hot

Determining a valuation and multiple

A marathon, not a sprint