Grab Stock Tanks: Here’s Why Investors Are Panicking Today

Grab Holdings just took a nosedive—and the market's scrambling for answers. The Southeast Asian super-app's shares are bleeding as we speak, but what's really driving the sell-off?

The bear case bites back

Rumors of regulatory heat in key markets combined with disappointing Q2 delivery metrics have traders hitting the eject button. When growth stocks sneeze, Grab just proved it can catch pneumonia.

Short sellers smell blood

With competition heating up and profitability still years away, bears are piling on. "Another cash-burning unicorn learning public markets don't do fairy tales," quipped one hedge fund manager (who's probably short 100k shares).

The stock's now down 60% from its SPAC debut—proving once again that retail investors get the champagne dreams while Wall Street keeps the bottles.

Shifting to profitability

Grab offers mobility, delivery, and financial services to more than 46 million monthly transacting users (MTUs) in eight countries across Southeast Asia.

This MTU count grew by 13% in Q2, helping guide the company to better-than-expected sales growth. At the business segment level, Grab saw sales for deliveries (groceries, packages, food orders, and more) grow by 23%, its mobility unit (ride hailing) increase by 19%, and its financial services balloon 41%.

Image source: Getty Images.

However, the business area that might have helped the company deliver its first profitable quarter was its burgeoning advertising business. Whether it is selling ad space to restaurants jockeying for increased visibility on a search or companies buying ad space for a customer to see while waiting on a ride, these ad sales bring high margins to Grab.

Now reaching a $236 million annualized run rate, these ads equal 1.7% of the delivery unit's gross merchandise value, up from 1.4% last quarter. Better yet, the number of self-serve advertisers on Grab's app grew by 31%, highlighting the attractive value proposition the service provides to restaurants of all sizes.

Quickly growing, now profitable, and armed with a net cash balance north of $5 billion to spend on tuck-in acquisitions or put back into the business for further growth, Grab looks like a promising growth stock trading at 7 times sales.