Grab CEO warns of possible cuts from plunging volume
Grab Holdings Inc. Chief Executive Officer Anthony Tan warned that the coronavirus is creating significant challenges for the Southeast Asian ride-hailing startup that will require “tough decisions” about cutting costs and managing capital.
“Covid-19 is the single biggest crisis to affect Grab in the eight years of our existence,” Tan said in a message to investors and partners on Monday. “It has had an unprecedented impact on our operations, our business and the livelihoods of our partners.”
The Singapore-based company is the most valuable startup in Southeast Asia as it has expanded beyond ride-hailing into food delivery and other services. In February, Grab raised more than $850 million to fund its push into financial services in the region.
But demand for ride-hailing services has collapsed as many cities across Southeast Asia are in lockdowns. Grab has been trying to offset some of that shortfall with food delivery, which is experiencing a surge in demand as people stay at home.
“There will be tough decisions and trade-offs to make as we continue to evaluate its impact on our business,” Tan said. “We will right-size our costs, manage our capital efficiently and make the necessary operational adjustments in order to weather the storm and carve out a path to profitability.”
His comments are the latest sign of troubles among the portfolio companies of SoftBank Group Corp. Founder Masayoshi Son has been among the most enthusiastic backers of ride-hailing companies, investing about $3 billion in Grab and billions more in Uber Technologies Inc. and China’s Didi Chuxing.
The Japanese company has taken repeated blows since the implosion of WeWork’s initial public offering last year. Softbank last week forecast a record 1.35 trillion yen ($12.5 billion) operating loss for the fiscal year ended in March.
Uber, which sold its Southeast Asian business to Grab in early 2018 in return for a stake, said last week it will write down about $2 billion in investments after the coronavirus pandemic upended the ride-hailing business.
The San Francisco-based company said the writedown of its minority investments will range from $1.9 billion to $2.2 billion. Uber holds shares in various ride-hailing and food delivery businesses around the world. The company valued holdings in Didi Chuxing and Grab at a combined $10.3 billion at the end of last year. It didn’t identify which investments were driving the charge.