Amid Wars In The Rideshare Industry, Alibaba Prepares To Invest $3 Billion In Grab

(Noted News) Alibaba Group Holding Ltd (BABA) is in talks to invest $3 billion into Singapore-based rideshare company Grab, according to a Bloomberg report earlier this week.

The $3 billion investment will represent about 20% of Grab’s most recent valuation of $14 billion, right under Uber Technologies’ 23.7% share of Grab. The Chinese e-commerce and technology behemoth will be the only investor in this funding round and plans to use a portion of the money to acquire Grab stock already owned by Uber.

Uber acquired its hefty stake in Grab in March of 2018, when amid fierce competition between rideshare services, Uber agreed to leave the South East Asian market completely in return for the share.

Uber’s stake in Grab is in preferred stock with a redemption date of March 2023. If Grab doesn’t go public by then, it will be forced to cough up at least $2.7 billion to Uber. Uber would then be able to reenter the South East Asian territory it withdrew from before. Uber’s CEO, Dara Khosrowshahi, is also on Grab’s board of directors.

Grab’s main competitor (besides Uber) is Gojek, the Jakarta-based company that operates in Indonesia, Vietnam, Singapore, Thailand, and the Philippines. Gojek was most recently valued at $9 billion, $5 billion less than Grab’s valuation.

Grab and Gojek are stuck in a complex, ongoing dispute regarding market control of South East Asia, as all of their investors and advisors push their own agendas on how to reach an agreement. Softbank, the Japanese conglomerate who has ownership in both Grab and Gojek, is being urged by its shareholders to broker a merger between the two companies. According to Tech in Asia estimates, such a merger would result in a company that creates nearly $17 billion in yearly revenue and could reach a $72 billion valuation by 2025.

Grab is being advised by JP Morgan Chase, and Gojek is being advised by Goldman Sachs, but it is unclear what the American banks’ opinions on the matter are. Grab and Gojek’s mutual goal is presumably to create an all-in-one app that controls South East Asia’s ridesharing, delivery, car rental, and digital payment industries. This could include additional features not offered by most rideshare programs, like Gojeks ‘GoMed’, which allows you to book medical appointments through the app.

If Alibaba Group’s plans go through and it acquires enough of Uber’s share, it would effectively move a massive portion of control over the South East Asian rideshare market from San Francisco to Hangzhou, which would likely force Uber to focus on its other markets.

Similar wars in the ridesharing industry are being waged in Europe, as Uber rivals like Estonian-based company Bolt (formerly known as Taxify) close in on Uber’s share of key territories like the U.K. and Central Europe. In 2019, the City Of London refused to renew Uber’s license because of concerns with its business model and its effects on London’s transport industry.

These types of regulatory hurdles are likely to arise in South East Asia as the rideshare industry develops further and companies like Grab and Gojek effectively create a monopoly on a market of nearly 700 million people.

Though the rideshare industry was hampered by the COVID-19 crisis, Alibaba Group has been doing well. After hitting a low of $170 per share during the market jitters of March, Alibaba Group (BABA) is currently trading just below its all-time highs at $277.

Word on Alibaba Group’s new investment idea came 2 days before its announcement on building a new factory in China, part of one of its “smart manufacturing” initiatives.

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